In 2020, NEA members helped elect a president who promised student-debt cancellation and fixes to the broken Public Service Loan Forgiveness (PSLF) program. Every student should be able to realize their dreams without incurring a lifetime of debt, said President Biden—and NEA members agree!
Today, we are navigating the results of that election, which include a new student-debt cancellation plan, announced last week by the White House, that could forgive up to $20,000 in federal student debt for borrowers. This comes on top of the temporary PSLF waiver, which has delivered $10 billion in loan forgiveness for public-service workers over the past nine months.
The question is: What does this all mean for educators?
Here are 10 things you should know.
For most educators, PSLF is still the king. With PSLF, educators and staff working in public schools and colleges are eligible for forgiveness of all federal loans after making 120 on-time payments. (For more detailed information on how PSLF works, see NEA’s resources at nea.org/pslf.)
New educators: Enroll now! This will ensure you receive all benefits entitled by the temporary waiver. Even if you have not reached 10 years of service or made 120 payments, this is critical. You’ll get in the right income-driven repayment plan from the start, and you can begin filing the annual employee certification forms required.
Experienced educators: You may have tried and failed to get PSLF in the past. (In 2020, 96 percent of PSLF applicants were rejected.) Things have changed. Last year, the Biden administration introduced the temporary PSLF waiver, which allows borrowers to count old payments, late payments, payments on ineligible federal student loans, and payments on different payment plans. This waiver expires October 31! You need to apply now, even if you don’t think you’ve made 120 payments yet.
All educators: You don’t have to figure this out on your own. Your union is here to help you. NEA has partnered with a company called Savi to bring the NEA Student Debt Navigator to NEA members, for free. They will help sort through your options, and help you apply for PSLF and the new cancellation plan. Earlier this year, with Savi’s help, West Virginia teacher Sara Ballengee had about $65,000 in debt forgiven. “They’d would send me the paperwork and say, ‘hey, get somebody in HR to sign this,’ and I’d email it back and they’d file it with the right people,” she recalls. “Honestly, if I’d had to do it myself, I don’t know if I could have done it!” Learn more about NEA resources, including webinars, fact sheets, and the Student Debt Navigator, at nea.org/studentdebt.
How does this new loan cancellation fit in? The way it works is all federal borrowers—whose personal income is less than $125,000 and household income under $250,000—will get $10,000 in federal debt canceled. Those who received Pell Grants, even just once, get $20,000 canceled. The White House estimates about 20 million borrowers will have their debt wiped clean. Current students, such as NEA Aspiring Educators, are also eligible for debt relief. If you are a dependent student, you will be eligible for relief based on parental income, rather than your own income.
Know this: if you’re already in a federal income-based repayment program, you don’t have to do anything to get the new cancellation. The government already knows your annual income and will automatically apply the deduction to your balance. (This will not affect your monthly payments, which are based on your income, not your balance.) Other borrowers will have to apply; federal officials have said this application will be released in early October and processed on a rolling basis. Borrowers will have over a year to apply.
Income-based repayment also is changing. Many NEA members have told the Biden administration that the cost of payments on the income-driven repayment program are too big a stretch. Before Virginia teacher Chris Adams got PSLF this year, his monthly loan payment was nearly $400 a month. That’s a month’s worth of groceries for some families—and a primary reason Adams was still driving a 19-year-old Saturn! The Biden administration heard you. Last week, the White House announced that the Department of Education is working to implement a new income-driven plan for undergraduate loans that requires borrowers to pay no more than 5 percent of their discretionary income, down from 10 percent on current plans. (This reduction does not apply to graduate-level loans.) With this change, the White House estimates a teacher with an undergraduate degree earning $44,000 a year will pay $56 a month on their loans, compared to the $197 they pay now. We anticipate that the new plan will take effect sometime in 2023.
“But I’m not paying anything right now,” you say… Since March 2020, the start of the pandemic, federal borrowers haven’t had to make monthly payments. This pause was extended again by the Biden administration, this time through December 31. This is the final extension, the White House said, which means educators need to be prepared for their monthly payments to resume in January. Now is the time to make sure you’re in the right repayment plan! Don’t forget, even if you haven’t been making payments, each month of the payment pause counts as credit to your 120 payments for PSLF!
The most important thing for educators to remember? Once again: The PSLF waiver expires on October 31. It’s vital for educators to apply before the waiver expires. It doesn’t matter if you haven’t gotten to 120 payments yet. If you have old payments, late payments, payments on ineligible federal student loans, or payments made on non-income driven plans… you need to apply.
Our work is not done yet. When NEA members speak up together, we are heard! You sent hundreds of thousands of emails to the Department of Education, sharing your stories, and now we have a PSLF waiver, a new cancellation plan, and planned improvements to income-driven repayment plans. But we’re not done yet. As NEA President Becky Pringle said last week, when Biden announced the cancelation plan: “This is an encouraging step.” Too many educators are still struggling with debt, and too many of our students still can’t afford to get the degrees they need for the careers they deserve.
Note on possible taxation of student debt cancellation:
While we are eager to track its implementation, there is emerging chatter that the $10k/$20k debt cancellation may be taxable in some states. Thanks to the American Rescue Plan (ARP) that passed in 2021, any student loan forgiveness enacted before January 1, 2026 is not considered taxable income by the federal government or the IRS. However, there are several states that have not yet conformed to the ARP and borrowers in these states may face hundreds of dollars in tax liability this upcoming tax season.
· North Carolina
If you are in one of these states, we urge you to take advocacy action on this before tax season to ensure educators who take advantage of broad student debt cancellation do not get taxed by their state. Depending on your state, a solution may be done through either the state legislature or executive action enacted by the Governor’s office.
Note that even if tax liability persists, NEA members should not be deterred from taking advantage of broad student debt cancellation. Maximum tax liability in all the affected states is only several hundred dollars, which is outweighed by the thousands of dollars they will receive in debt forgiveness.