Strategy 95 of 107 · new for the five-year plan
Teacher forgiveness or disability discharge for student loans
What it is
Teachers in qualifying low-income schools for five years may get up to $17,500 forgiven.
Steps
- Teachers in qualifying low-income schools for five years may get up to $17,500 forgiven.
- A total and permanent disability can discharge federal student loans.
- Send the freed payment to principal.
Repeat: Once.
Measure: Monthly payment freed.
Try it in the calculator Enter its amount in "Monthly non-income amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- Eligibility rules and paperwork.
- Discharged amounts can affect taxes in some states.
Who it fits
Single, Married couples, Newlyweds, Average household, No college degree
Needs
Has student loans
How predictable
Depends on people or program rules (tenants, family, IRS records, lenders)
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (single). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: teachers in qualifying low-income schools for five years may get up to $17,500 forgiven.
Suppose it brings $600 a month on principal from this strategy, not from the paycheck. The loan would be paid off in 16 years 3 months instead of 30 years, saving about $196,219 in interest. To finish in five years, they would still need about $3,374 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sequences that use it
- Student loans gone, then the house: Every student loan payment that ends becomes a principal payment the next month.
Sources and more information
- Federal Student Aid: Teacher Loan Forgiveness studentaid.gov
- Federal Student Aid: Total and permanent disability discharge studentaid.gov
Where to get help
- CFPB: Find a HUD-approved housing counselor (free or low cost) consumerfinance.gov
Related strategies
- 94. Public service loan forgiveness, then roll the payment
- 93. Let your employer pay student loans tax-free, then roll that payment
- 92. Owners of an S or C corporation: get reimbursed tax-free for home office and mileage
- 91. Ministers: a designated housing allowance
- 90. Run a licensed adult family home
- 89. Board horses on pasture or in a barn you already have