Will a New Teacher Loan Assistance Bill Solve Anything?

Earlier this month, legislators in the House and Senate introduced TELORA, a bipartisan bill to improve the confusing patchwork of federal loan programs for teachers. The new proposal implicitly seeks to streamline existing programs and has the explicit purpose “to encourage highly qualified individuals to enter and continue in the teaching profession, and to ensure qualified effective teachers are encouraged to work in high-need schools.” But is it likely to deliver on these promises?

Existing Aid Programs for Financing Teacher Education

Currently there are three federal student aid programs to help alleviate student debt available only to teachers. In order to attract high-quality teachers to high-needs schools, TEACH grants provide aid to prospective teachers who commit to working in certain subject areas in low-income schools for four years. The other two programs, Stafford and Perkins, provide varying levels of loan forgiveness (up to $17,500) to those teaching certain subjects in low-income schools, for a specified amount of time.

Additionally, a program called Public Service Loan Forgiveness (PSLF) provides unlimited loan forgiveness to anyone after ten years of working for the government or a non-profit, and virtually all teachers qualify. PSLF works when paired with Income-Based Repayment (IBR) by tying monthly payments to income rather than the amount borrowed.

Will TELORA Streamline Loan Programs for Teachers?

Under the proposed legislation, the three existing teacher-targeted benefits would be eliminated, replacing them with a guaranteed monthly payment made by the U.S. Department of Education on the borrower’s behalf for up to six years. For those teaching in high-needs schools, the federal government would contribute $250 towards paying down the loan in their first two years, $300 in year three, $350 in year four, and $400 in the final two years. If those payments are greater than the borrower’s monthly payment, the additional dollars are applied to the borrower’s interest and principal. These proposed benefits could be received in conjunction with IBR and PSLF.

The bill’s authors should be commended for attempting to eliminate the TEACH grants, a program that often falls short. For students who end up not fulfilling their four-year pledge, the grant converts to a loan that they have to pay back, on top of any other loans they may have. The Government Accountability Office issued a report earlier this year indicating that almost a third of students see their TEACH grants convert to loans within one to two years of graduating, and the Department of Education estimates that 74 percent of grants will convert to loans that will need to be repaid in full. To make matters worse, about two-thirds of TEACH grants have been provided to students in education colleges identified as at-risk or low-performing by their state despite the program’s intent as an incentive for graduates of “high-quality” teacher preparation programs to enter and stay teaching in high-needs schools. In addition, the interest on these loans accumulates from the date they were disbursed, meaning that students pay back much higher balances than their initial award.

TELORA’s implicit intent to streamline the confusing and often overlapping benefits available to teachers, and in particular, eliminate TEACH grants, is the right one. But because PSLF still exists for teachers, there are still two teacher loan forgiveness programs—one that offers a monthly benefit for six years and another that forgives total debt after ten. These remaining programs alone could cause plenty of confusion for borrowers, who may not realize that to get the maximum benefit they still must enroll in IBR on top of these monthly payouts. Still, the proposal is simpler than what exists right now.

Technical Hurdles Remain for TELORA

One of the most puzzling aspects of TELORA is how the government will manage the monthly payments. Since TELORA’s benefits accrue in real time (rather than loan forgiveness, which happens once) a more intricate structure is necessary. But the bill’s text is vague on implementation. A press release from Senator Hatch (R-UT), one of the co-sponsors of the bill, lays it out: states would report the number of eligible teachers to the federal government, the feds would give states the money, the states would give that money to the loan servicers, and the servicers would apply the reductions each month.

While that may sound simple, the process is likely unworkable. First, states would have to identify the number of eligible teachers and report this to the feds on a monthly basis. Because loan information is currently not available to states and schools, the proposal raises privacy, implementation, and cost concerns. States would also be responsible for determining how long a teacher had been employed in a high-needs district, creating complications if employees relocate or switch schools. After navigating this hurdle, within a 30-day window, the federal government would need to disburse the dollars to the state, which would give that money to the borrower’s servicer.

Seamlessly reducing monthly payments for teachers in high-needs schools is an admirable goal. However, these technical barriers make the law unlikely to work, and would be very prone to error.

Will TELORA Attract and Retain Effective Teachers in High-Needs Schools?

At best, TELORA provides an incentive to any teacher with loans to teach in a high-needs school. It provides no mechanism to meet its stated goal of attracting more effective teachers to such schools—for instance by tying forgiveness eligibility to teacher preparation program quality or to state certification test scores, such as the edTPA. Instead, the benefits discriminate only between those teachers who have student loans and those who don’t (in 2012, a full 33 percent of Master’s of Education recipients didn’t have any debt, at least some of whom are working in high-needs classrooms). Thus, as with TEACH grants, it’s unclear if the recruitment incentive will work as intended. Plus, the average level of debt for a Master’s recipient in education has nearly doubled since 2004, and, just like with PSLF, TELORA does nothing to reverse the rising costs at these colleges or hold them accountable in preparing these teachers to be effective.

The retention incentive, however, is a positive improvement over the status quo. Unlike TEACH grants and the existing loan programs, which only provide benefits after at least four years of service, TELORA rewards teachers as soon as they enter the classroom, provides their benefit on a monthly basis, and increases it as they obtain more classroom experience. This could encourage greater teacher retention in high-needs schools than the existing programs, which is important because research suggests that teachers improve the most during their first few years on the job.

However, there is nothing to incentivize teachers to work in high-need schools after year six—a time when experienced teachers are particularly valuable, yet more likely to move on to less stressful positions. For teachers who do stay in high-needs schools, their monthly payments after year six will be identical to what they are under current law because IBR payments are based on income. While the payments made on behalf of the borrower would lower their total loan balance, this manifests in a lower amount forgiven under PSLF, not an additional benefit to the borrower

Research also suggests that teachers are attracted to teach and stay teaching in high-needs schools less for loan forgiveness and more for other reasons including higher base pay, promise of career advancement, and positive working conditions like strong school leadership, collaborative time, and a supportive school structure. Thus, there’s likely a better way to use the dollars in TELORA to recruit and keep great teachers in high-needs schools than loan assistance.

A More Promising Alternative

A teacher enrolled in this program for six years would receive $23,400, meaning that, especially after factoring in administrative costs, this program would require a lot of federal dollars. There are likely more promising ways to use these funds to attract and retain effective teachers in high-needs schools than the backdoor of loan assistance, especially considering that not all teachers have loans. Rather than create a complex loan repayment strategy for teachers, these dollars could be used to support areas we know are critical to recruiting and keeping more effective teachers in hard-to-staff schools—through higher pay coupled with investments in stronger school leadership and teacher advancement opportunities. "