Student loans: A 'teacher penalty' is crushing generations of educators with debt

After nearly two decades in public service, James Stewart, a science teacher from Maryland, is fighting an uphill battle to deal with $122,000 in student loans.

“It can be overwhelming,” the Dorchester County Public Schools teacher told Yahoo Finance, explaining that he managed to avoid student debt for his undergraduate education and master's degree but took on loans for his doctoral degree in educational leadership at the for-profit chain University of Phoenix. 

When he applied for Public Service Loan Forgiveness (PSLF) a few years ago, he held around $104,000 in loans. That pile continues to grow.

Stewart is just one of many educators facing this problem: Educators across America are heavily weighed down by student debt, according to a new report from the National Education Association (NEA). 

The union's report, which surveyed nearly 2,500 educators between October 30 and December 14 of 2020, looked at educators’ loan status, repayment type, payment difficulties, debt relief and loan forgiveness, and personal negative impacts of student loan debt. 

“No matter what we look like, where we live, or what’s in our wallets, all of us should be able to pursue our dreams at an affordable college or university,” NEA President Becky Pringle said in a statement. “But today, the cost of college imposes a ‘teacher penalty’ on educators, saddling them with a lifetime of debt before they even enter the classroom.”

Tuition inflation in the 21st century has led to heavy borrowing and a student debt crisis that some lawmakers are urging the White House to address through broad cancellation of some federally-backed debt.

According to the NEA, 45% of educators took out student loans averaging $55,800 to attend college. Out of this group, 14% with unpaid student loan debt have a current balance of $105,000 or more. And educators of color and younger educators have been particularly impacted.

Pringle called on the Education Department to “immediately forgive all outstanding debt for educators with 10 or more years of experience as the Public Service Loan Forgiveness program was designed to do."

The Public Service Loan Forgiveness (PSLF) program was designed by Congress to help government and nonprofit employees with federally-backed student loans apply for forgiveness after proof of 120 monthly payments under a qualifying repayment plan. It's also notoriously painful to navigate and regularly rejects the vast majority of applicants.

“I'll be working still during my very last days, I guess, to pay the thing off,” Stewart said about his debt. “Unless I get lucky and become like a [Amazon CEO Jeff] Bezos or whatever.”

Payments on federally-backed student debt are paused until January 31, 2022. Nevertheless, some lawmakers have expressed concern about whether borrowers will be able to smoothly transition back to repaying their loans or if the resumption of payments will cause spikes in delinquencies and defaults.

Senators Elizabeth Warren (D-MA), Chuck Schumer (D-NY), and Congresswoman Ayanna Pressley (D-MA) have repeatedly called on Biden to cancel $50,000 in student loan debt immediately via executive order.

The racial gap and generational divide in educator debt

The NEA noted significant disparities between the debt levels held by white borrowers and borrowers of color.

The study found that 56% of Black educators have taken out student loans, as compared to 44% of white educators. Black educators also took out significantly more debt than other groups, with an average initial total of $68,300, as compared to $54,300 taken out by white borrowers and $56,400 by Latino borrowers. 

Furthermore, about 16% of Black borrowers with student loans hold more than $105,000 in debt, as compared to 11% of white borrowers.

There's also a generational divide in terms of how much student loan debt educators take on: 65% of educators between 18 and 35 have taken out student loans, as compared to just 27% of those above 61.

For younger educators, paying the debt off has impacted their ability to buy a home, go back to school, or start a family, the report said.

That said, older educators are also being impacted by student debt. More than a quarter of educators above the age of 61 who took out student debt still have a balance. And almost four in ten have $45,000 or more left to pay off, the report noted.

For this age group, two-thirds of educators with outstanding student loans also said their debt has affected their ability to save for retirement.

PSLF program woes

One consumer advocate recently called for immediate action after a Consumer Financial Protection Bureau (CFPB) report flagged legal violations by student loan servicers that administer the PSLF program.

In October 2019, the New York attorney general sued the Pennsylvania Higher Education Assistance Agency (PHEAA), the loan servicer who handles the PSLF program, for "failing to properly administer" the program. The suit alleged that the servicer engaged in "deceptive, unfair, and abusive practices in administering the federal program."

In response, PHEAA recently announced that it was quitting the business as of December this year.

"The federal government should take action to cancel a substantial amount of federal student debt," Attorney General James stated. She also noted that she co-led 17 state Attorneys General in February this year, urging the adoption of House and Senate resolutions that call for the cancellation of up to $50,000 in federal student debt for all federal student loan borrowers. 

"Canceling this debt will help free borrowers burdened by loan payments, and allow them to move forward with their lives, as well as helped to close the racial and gender wealth gap," James added. "The student debt crisis has been exacerbated by misconduct by student loan servicers."

Aarthi is a reporter for Yahoo Finance. She can be reached at [email protected]. Follow her on Twitter @aarthiswami.

Read more:

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  • Spending $4 trillion to fix inequities in U.S. higher education would pay for itself in 10 years, study argues

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