Forgivable Loans: Their Success Is Mixed, Future Is Unsure

By Blake Rodman — September 04, 1985 6 min read

State-sponsored financial-aid programs to draw new talent into the teaching force among the first education-reform initiatives to win lawmakers’ backing apparently have so far logged an uneven record of success.

In some of the 28 states that have adopted loan-incentive programs for teachers--and particularly in those offering “forgivable” loans to talented college students who agree to work as teachers in the state after graduation--officials report difficulty in finding takers for the money available.

In Mississippi, for example, about half of the $100,000 available to mathematics and science students who would agree to teach in the state went unclaimed last year, according to state officials.

Florida officials, too, though optimistic about the coming year, report that last year less than half of the $1.5 million available for teacher loans was actually used.

In Washington State, on the other hand, financial-aid officials report that there was no shortage of applicants for the $300,000 available to students last year through a loan program similar to Mississippi’s.

“We have been able to use the money 100 percent,” said Marilyn V. Sjolund, an administrator for Washington’s three-year-old incentive-loan program for mathematics and science.

Program administrators in Arkansas, Maine, Nebraska, and North Carolina also report full use of available loan money, with some noting a surplus of applicants.

“It has been a very popular program,” said Larry G. Lanes, assistant coordinator of student aid for the Arkansas department of education. “We’ve had more applicants than money.”

Uncertain Impact

But even in states where the utilization of forgivable-loan funds runs high, no one is certain yet what such programs’ long-range impact on teacher problems will be. Said one student-aid administrator: “The jury is still out.”

During recent years, lawmakers in more than half of the states have included forgivable-loan provisions in their education-reform packages, hoping to attract outstanding students to teaching at a time when the supply of teachers is dwindling, especially in the areas of mathematics and science.

About a dozen other states have had such programs under consideration.

In addition, some states now offer financial-aid incentives to encourage practicing teachers to retrain in mathematics or science. And others, trying to retain currently employed teachers, will repay their outstanding student loans.

College Board Survey

Such loan programs are now “the most frequently legislated incentive to attract students to teaching,” according to Irene K. Spero, a government-relations associate for the College Board who testified before a Congressional panel this summer on the programs’ apparent difficulties.

A College Board survey of the 28 states with forgivable-loan or “loan-repayment” programs in place, Ms. Spero told the House Subcommittee on Postsecondary Education at a hearing on the reauthorization of the Higher Education Act, found less success than had been anticipated by the states.

Program administrators in more than half those states, she said, “reported the available loan funds were not, or were not anticipated to be, completely utilized because of insufficient numbers of applicants.”

‘Buy-Out’ Options

But recent interviews with loan-program officials in a number of the states underscore the difficulties involved in assessing the programs’ results nationwide.

Although rates of forgiveness vary from state to state, for example, all states offer students the option of paying off the loan instead of teaching. Some states, such as Texas, which is beginning the first year of its program, charge high interest rates to those who later decide not to teach. But others, such as North Carolina, charge less than the prime rate.

Offering a “buy-out” option with desirable terms, some officials argue, makes the loans attractive to any student, and encourages some with no intention of teaching to apply for them.

In other states, where loan money has not been fully utilized, officials say the programs have not been widely publicized and they expect the situation to reverse itself as the availability of teacher loans becomes better known.

Florida’s large pool of unclaimed loan money from last year, for example, is now a thing of the past. The state has already awarded its total loan allotment for the coming school year.

“The program is another year older and is being publicized better,” said Robert D. Henker, director of student financial assistance for the state department of education. He said, however, that it is still too early to tell how much will actually be distributed this year, because some of the recipients will end up not accepting the awards.

Mississippi’s Reversal

But in Mississippi, although most of the $100,000 available during the first year of the teacher-loan program was dispensed, the number of applicants fell sharply last year.

“I just don’t know why the numbers dropped so much,” said Dottie C. Strain, a financial-aid officer for Mississippi’s postsecondary institutions. “It was heavily publicized in newspapers, on TV, and in fliers to the universities.”

During the first two years of the Mississippi program, students had to attend a public institution to qualify for a forgivable loan, but this summer the law was changed to include students attending private universities and colleges. As of last month, however, the change had not increased the number of applicants; only 34 of the 100 available contracts had been signed, Ms. Strain said.

“There is just not that much interest in teacher education,” she said.

Debate Over Effectiveness

In interviews, state officials generally agreed that most of the loan programs have not been in place long enough to determine the incentive’s effectiveness in attracting top students to teaching.

But in her testimony before the House panel, Ms. Spero said that studies of similar forgivable-loan programs tested during the late 1950’s and early 1960’s found “no clear-cut evidence” that they effectively increased the quantity or quality of teachers.

“The ability to attract and retain the best and the brightest teachers,” Ms. Spero argued, “will depend first, on making teaching a more desirable career and, only secondly, on incentives such as loan forgiveness.

‘Quick-Fix’ Remedy

Critics of such incentive programs say they are “quick-fix” remedies enacted by lawmakers who are under pressure to do something about the teacher “crisis.”

“It is hardly surprising that this remedy is one that is popular,” said Lawrence E. Gladieux, director of the College Board’s Washington office. “It doesn’t cost a great deal and attracts some attention… But we shouldn’t kid ourselves into thinking that these loan programs are going to solve the problem.”

One loan administrator said he doubted whether many students would make a career decision based on a $5,000 loan. “The best and the brightest are more far-sighted than that,” he said.

Still, champions of the state programs express optimism that they not only will attract the talented to teaching but will also have several less-publicized benefits.

Forgiveness provisions, these officials say, may draw students who intended to teach in a subject other than mathematics or science to one of those shortage areas, and also may encourage teachers to stay and work in their state, at least until the loan is forgiven.

“Even if these loans don’t do what they are intended to do,” said John J. Siegrist, director of student financial aid for the Connecticut department of higher education, “they do provide some remuneration to those who want to go into teaching but will be shortchanged on the salary side when they get into the profession.”

A version of this article appeared in the September 04, 1985 edition of Education Week as Forgivable Loans: Their Success Is Mixed, Future Is Unsure