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CFPB: Student Loan Debt and Financing

(Source: CFPB) - Training highly-qualified teachers requires higher education, including, for many, the pursuit of an advanced degree. And for these teachers and those aspiring to join their ranks, student debt remains an obstacle.

Recently, the CFPB has heard from teachers and other education professionals about the impact of rising student debt on schools, educators and the communities they serve. Here are some of the questions that we’re trying to answer.

Does student debt dissuade Americans from becoming teachers?

The National Center for Education Statistics estimates that the United States will need over 425,000 new teachers by the end of this decade to make up for the wave of retiring baby boomers. Despite this challenge, compensation for public school teachers has not kept pace with the private sector— according to one study, starting public school teachers in 19 states earn less than $33,000 per year.

As starting salaries stagnate and student debt grows, student loan payments will consume an increasing share of new teachers’ discretionary income. This combination of low starting salary and rising student debt ensures that new teachers must perform a tenuous high-wire act in order to achieve the sort of middle-class security attained by previous generations.

Does student debt contribute to high turnover for new teachers?

When adjusting for inflation, average total student loan debt has increased by 49% over the past decade. Rising student debt is squeezing young teachers and this may be causing them to quit teaching. The share of public school teachers leaving the profession each year has increased by 50% since 1992. And newer teachers are more than twice as likely to leave teaching as those that have taught for more than 10 years.

Recent cuts to state and local budgets have accelerated this trend—there are now over 300,000 fewer teachers than there were in 2008. Students pay the price through rising class sizes and high attrition—student debt may be leaving a legacy of diminished performance in schools across the country.

For many teachers, career advancement is tied to obtaining an advanced degree that they must finance on their own, leading to more debt. Is student debt contributing to shortages of highly-qualified math and science teachers?

In order to compete in a global economy, we must ensure that our schools are able to equip the next generation of students with the knowledge and skills that the job market demands. In the past decade, we’ve faced a growing shortage of highly-qualified math and science teachers.

Rural and urban school districts face particularly severe shortages—in effect, the communities with the most urgent need for great teachers tend to be the school districts with the fewest. And teachers in rural districts generally earn less than their peers—the starting salary for rural teachers is lower than the starting salary for non-rural teacher in 39 states.

For highly-qualified teachers interested in pursuing careers in underserved communities, student debt may act as another deterrent. Three-quarters of new teachers with master’s degrees borrowed to finance their education. These teachers carry an average of more than $35,000 in student debt—in many cases total borrowing may exceed starting salary, ensuring the best qualified teachers must bear the greatest burden.

What role do loan repayment and loan forgiveness programs play in teacher recruitment and retention?

There are a number of existing loan repayment and forgiveness programs designed to encourage college graduates to pursue careers in teaching. Some programs may be available to all borrowers with federal student loans and others may be contingent upon teaching in a particular state or community. The largest and best-publicized programs are administered by the U.S. Department of Education, but individual states and municipalities may offer benefits to recruit and retain new teachers.

We’ve heard that this patchwork of benefits may be confusing for new teachers and it may be in school districts’ interests to help new employees navigate these options. In the context of teachers’ growing student debt, forgiveness and repayment programs may offer a path forward for underserved communities that cannot afford to compete for new teachers based on compensation alone.

As we seek to understand how consumer financial products work, we look forward to learning more from others about the impact of student debt on our society.

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