How Student Debt Relief and Loan Forgiveness Can Help Solve Educator Shortages

Enact Broad-Based, Federal Student Debt Cancellation for Borrowers

The Biden administration’s proposal to cancel $10,000 of loan debt for low- and middle-income borrowers, with an additional $10,000 canceled for Pell Grant recipients, is a promising first step. [Note: In November, this program was paused by federal courts.] However, cancelling $50,000 of student loan debt would fully remove the burden from more than half of the educators currently carrying it and substantially reduce it for the remainder. While current policy efforts focus on federal student loans, these need to be expanded to include private loans, which account for more than 7 percent of student debt.

Support Educators’ Applications for the PSLF Waiver

In October 2021, the U.S. Department of Education announced a major overhaul to the failing Public Service Loan Forgiveness (PSLF) program. The Biden administration’s overhaul fixed some of the technicalities and resulted in near-immediate forgiveness for tens of thousands of public service workers and eventual forgiveness for many more. However, the PSLF waiver expires on October 31, 2022. Employers should help to make sure that every eligible educator receives the student debt relief they deserve.

Utilize CARES Act Funds to Pay or Reimburse Employees’ Student Loans

The CARES Act modified the IRS code (Section 127), which allows employers, through established educational assistance programs, to pay or reimburse employees’ student loans up to $5,250 per year tax-free to both the employer and the employee.

The student loans can be for education received before employment or education the employee is currently pursuing while employed.

Payments can be made to the employee, the lender, or the student loan servicer that processes payments for the lender.

Congress extended this benefit through January 1, 2026. The U.S. Department of Education released guidance that school districts can use the emergency federal funding from recent stimulus bills to create and support this program.