What policymakers can learn from the Teacher Loan Forgiveness program

A new Wharton study finds a new student loan debt forgiveness program for teachers program ‘broken,’ and raises broader issues on how student aid programs could backfire.

Amid the debate over President Joe Biden’s plans for student loan debt forgiveness, a new research paper by experts at Wharton School and elsewhere has recommended a rethink of an existing program that provides student loan waivers for teachers but has failed to deliver on its promise. The so-called “Teacher Loan Forgiveness” (TLF) program is designed to incentivize teachers to spend at least five consecutive years in low-income (or high-need) schools by reducing their student loans by between $5,000 and $17,500.

A teacher listens to a young student at their desk.
Image: iStock/MangoStar_Studio

The paper, titled “The Value of Student Debt Relief and the Role of Administrative Barriers: Evidence from the Teacher Loan Forgiveness Program,” finds that the TLF program did not attract teachers to high-need schools, nor did it make a difference to their tenure at those schools.

“The potential for debt relief didn’t seem to do enough to move the needle to influence where teachers were choosing to work,” says Wharton finance professor Benjamin Keys, one of the paper’s co-authors.

Numerous programs offer federal student loan forgiveness or cancellation, but the paper’s authors decided that the TLF program is “an ideal test case” because of its “clear target population, straightforward forgiveness amounts, and shorter time horizons for forgiveness.”

The study used a combination of quasi-experimental and experimental evidence on the TLF program, in combination with survey data and qualitative evidence. It compared outcomes for teachers with similar profiles who do and do not qualify for the program, and found “no difference in teacher retention” over five years of employment. It pointed out that during that period, other attributes of the school and teachers were “smooth” or unchanged, and concluded that “loan forgiveness eligibility alone is not sufficient to alter teacher employment patterns.” Its verdict: “The TLF program does not have a significant effect on retaining teachers or on attracting them to high-need schools to begin with.”

Next, the study looked at whether informational barriers could explain the lower-than-expected take-up of the TLF program by analyzing the outcome of randomized mailers to more than 44,000 teachers at eligible schools, and found an increase of 5 percentage points in the “likelihood” of qualified teachers who applied for TLF. The additional information had no impact on teachers who had not yet accumulated the years of experience required to qualify for the program.

“We were able to move the needle in terms of the understanding of the program,” Keys says. “Teachers who received this outreach from us were more likely to say they had a basic understanding of the rules of the program. We were also able to increase the take-up among those teachers who had already hit the magical five-year threshold [of consecutive experience].”

But that is where the needle stopped moving. “More information [about the TLF program] didn’t change where teachers worked,” says Keys. “Teachers didn’t change their decision about how long they stayed in the school or what type of school they taught in, or whether they stayed in a high-need school. We saw the same amount of [teacher] turnover in these high-need schools, which is quite high. These are very often stressful jobs.”

Read more at Knowledge at Wharton.