If we forgive your student loans, will you please come teach?

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The Wall Street Journal recently featured the rapid growth of student loan debt—outstanding debt has more than tripled in the 10 years ending in 2012. Total student loan balances now exceed those of auto loans and credit cards, the largest categories of consumer debt in prior years. Currently, the total amount of outstanding student loan debt is over $1.3 trillion and still growing every second as interest continues to accrue.

In response to the rising levels of college loan debt and workforce shortages in some public-oriented occupations, many states have adopted loan forgiveness programs in an attempt to kill two birds with one stone[1]. And those states with loan forgiveness programs generally have a program offering these benefits to teachers entering the classroom. Though loan forgiveness policies appeal to constituencies and solve workforce needs simultaneously, there is limited prior evidence of their effectiveness as a tool for attracting and retaining teachers. In addition to state-level loan forgiveness programs, the U.S. Department of Education also offers this benefit through a program at the federal level. The federal Stafford Teacher Loan Forgiveness program requires teachers to be teaching in an approved school, usually low-income Title I schools, for five continuous years. The loan forgiveness value is usually less than $5,000, though secondary teachers in math, science, or special education may qualify for up to a forgiveness value of $17,500.

In a recent paper, Tim Sass (Georgia State University) and I investigated the impact of a teacher loan forgiveness program that was implemented in Florida for over two decades (1984-85 to 2009-10). Unlike the federal teacher loan forgiveness program, the Florida Critical Teacher Shortage Program targeted teachers teaching in “hard-to-staff” subjects instead of those teaching in low-income schools. Under the program, the maximum allowable loan value forgiven was $10,000—paid out at values of up to $2,500 per year over four years for undergraduate loans and up to $5,000 per year over two years for graduate loans.

Shortage subject areas were determined by the Florida State Board of Education annually, and we saw substantial variation over time in which subject areas were eligible for loan forgiveness.  We took advantage of this variation across time and subject areas to identify the impact of offering loan forgiveness on teachers’ labor supply decisions. We found that this program was effective at keeping middle and high school math, science, and English for Speakers of Other Languages(ESOL) teachers in public schools.

Funding for the program was nearly cut in half in 2002, which led to a corresponding drop in annual loan forgiveness payments per qualified teacher.  The variation in the generosity of payments allows  us investigate teachers’ responses to differences in net pay. For special education teachers, we find that the post-2002 low payout period is not sufficient to generate a behavioral response while the loan forgiveness did reduce the likelihood a special education teacher would exit the public school system in the high payout era.Based on our findings, I believe loan forgiveness programs can be effective tools for retaining teachers in the profession, as long as they are implemented well.  I conclude by presenting three key lessons that will be helpful to policymakers designing or re-designing loan forgiveness programs in the future.

Three key lessons for policymakers designing loan forgiveness programs in the future

  1. Teachers in different subject areas will respond to the incentive of loan forgiveness differently depending on their working conditions and their outside options such as the marketability of their skills. Teachers in more challenging classrooms, such as special education teachers, or those working with high proportions of disadvantaged students, need to be compensated more to retain them. Generally speaking, traditional teacher salary schedules do not allow for such wage differentials, though policymakers can leverage loan forgiveness programs to target these areas in an effort to stem the otherwise natural outflow of talent.
  2. Policymakers may be faced with a tradeoff between increasing the number of eligible participants for a small benefit and targeting the number of participants for a larger benefit. Our findings caution against expanding too much, as doing so may inadvertently undermine the program’s objective.
  3. In view of the recent literature on the long-term benefits to students of having a high value-added teacher, future loan forgiveness programs might consider additional criteria for recruiting and retaining not only teachers in the hard-to-staff assignments but also high-quality teachers.


[1] According to a recent report published by the National Conference of State Legislatures, at least 35 states have certain education loan forgiveness programs as of 2015. The American Federation of Teachers also maintains an up-to-date database of all teacher loan forgiveness programs that is searchable by grade level, position, subject areas, and states.