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TEACHER LOAN FORGIVENESS EXPANDED: Congress Passes Temporary Fix for Student Loan Loophole, Transfers Savings to Expand Incentives for Teachers in High-Poverty Schools

"This bill will protect taxpayers by shutting down these excess subsidies to lenders . . . and it will use the money to help teachers and poor schools across the country,"

Last week, the U.S. Congress passed legislation that would temporarily close a loophole that has allowed student loan providers to receive excess taxpayer subsidies and divert the savings toward enhancing loan forgiveness for teachers in hard-to-staff subjects. The bill, known as the Taxpayer-Teacher Protection Act, received unanimous support in the House of Representatives and the Senate and is strongly supported by the White House.

“This bill will protect taxpayers by shutting down these excess subsidies to lenders . . . and it will use the money to help teachers and poor schools across the country,” said Representative John Boehner (R-OH), chairman of the House Education and Workforce Committee, who, with Senator Judd Gregg (R-NH), proposed the bill.

Specifically, the bill will expand federal student loan forgiveness from the current maximum of $5,000 to a new maximum of $17,500 for math, science, and special education teachers who agree to teach for five years in a Title I school (those schools with a poverty rate over 40 percent). This provision would not replace the current $5,000 loan forgiveness program for other teachers in Title I schools.

Similar legislation, introduced by Representative Joe Wilson (R-SC), passed the House of Representatives in July 2003, but never saw action on the Senate floor. A key difference between the two bills was that the Wilson legislation included an amendment by Representative George Miller (D-CA) that added loan forgiveness for reading teachers.

In its report Every Child a Graduate, the Alliance called for a plan that would provide enhanced loan forgiveness for all teachers in high-need areas, including reading, English, and history teachers. Although the Congress-passed bill does not expand loan forgiveness to that extent, it is a step in the right direction, and will help attract high-quality teachers to the areas that need them the most.

Despite his support for the bill, Representative Miller, the top Democrat on the Education and Workforce Committee, warned that the Taxpayer-Teacher Protection Act would only close the loophole partway, and only for one year. “Today’s bill is a welcome, though overdue, step forward,” he said. “But students and teachers should be disappointed that Republicans chose to protect excessive bank profits instead of further expanding higher education opportunities.”

In response, Chairman Boehner said that reauthorization of the Higher Education Act, expected next year, would close the loophole forever. “Make no mistake about it: we’re closing this loophole, and once it’s closed, it isn’t coming back,” Boehner said. “The only question is whether Democrats and Republicans can agree on how much money should be used within the Higher Education Act. In the meantime, this bill gives us the chance to close down the subsidies now, and use the money for something we can all agree is a worthy cause.”

The bill will repeal portions of a 1980 law that was enacted to ensure that college loans remained affordable during a time of rising interest rates. Under that law, some lenders had been able to receive interest payments totaling 9.5 percent on federally backed loans. The U.S. Department of Education then paid the difference between the 9.5 percent figure and the students’ variable rate, currently about 3.5 percent. In February, President Bush asked Congress to end the subsidy, which had been projected to exceed $4.9 billion over the next ten years, according to CQ Weekly.

A copy of Boehner’s statement is available at

A copy of Miller’s statement is available at

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Every Child a Graduate. Every Child Prepared for Life.