Apr 26 2016

How Effective Are Loan Forgiveness and Service Scholarships for Recruiting Teachers?


Teacher shortages pose a recurring problem in American education. Teacher salaries lag behind those of other occupations that require a college degree, and young people often accrue significant debt to prepare for the profession. Recruitment and retention challenges are typically greatest in underserved urban and rural communities, as well as in subjects like math, science, and special education in which people can earn significantly higher starting salaries in private sector jobs. Even after adjusting for the shorter work year, beginning teachers nationally earn about 20% less than individuals with college degrees who enter other fields, a gap that widens to 30% by mid-career.Bruce D. Baker, David G. Sciarra, and Danielle Farrie, “Is School Funding Fair? A National Report Card,” (2015): 28. Compounding this challenge, more than two-thirds of those entering the education field borrow money to pay for their higher education, resulting in an average debt of $20,000 for those with a bachelor’s degree and $50,000 for those with a master’s degree.Sandra Staklis and Robin Henke, “Who Considers Teaching and Who Teaches?,” U.S. Department of Education, National Center for Education Statistics (November 2013): 13; U.S. Department of Education, “Web Tables: Trends in Graduate Student Financing: Selected Years, 1995–96 to 2011–12,” (2015). College loans represent a significant debt burden for many prospective teachers and a potential disincentive to enter the profession.Baker, Sciarra, and Farrie, “Is School Funding Fair? A National Report Card.”

As in other professions, such as medicine, a promising approach to attracting and keeping teachers in the profession involves offering subsidies for preparation—loan forgiveness or service scholarships—tied to requirements for service in high-need fields or locations. If recipients do not complete their service commitment, they must repay a portion of the scholarship or loan, sometimes with interest and penalties.

The federal government and the states have long offered such incentives to medical professionals to fill needed positions and have periodically done so for teachers as well.Such incentives have also been available to public interest lawyers, often provided by law schools. NYU Law School’s Innovative Financial Aid Study, which randomly assigned applicants to various financial aid packages and debt structures with equivalent net values, found that law students who received scholarships (as opposed to loan forgiveness) had a 37% higher likelihood of their first job being in public interest law, and also appeared to be of a higher quality. See Erica Field, “Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School,” American Economic Journal: Applied Economics 1, no. 1 (2009): 1. In both medicine and teaching, research suggests that these programs have been successful when the subsidies are large enough to substantially offset training costs. More affordable than across-the-board salary increases, loan forgiveness and scholarship programs offer a targeted, short-term approach to increasing teachers’ overall compensation package at the time that it matters most to individuals’ career decisions.See, e.g., Frank Adamson and Linda Darling-Hammond, “Speaking of Salaries: What It Will Take to Get Qualified, Effective Teachers in All Communities,” Center for American Progress, (2011): 7.

Loan Forgiveness & Service Scholarship Programs in Medicine

Multiple studies have found that loan forgiveness and service scholarship programs are effective at recruiting and retaining healthcare professionals into geographic and practice areas with shortages. An analysis of 43 studies exploring the effectiveness of financial incentive programs in recruiting and retaining healthcare workers in underserved areas found that financial incentives (including service scholarships, loan forgiveness, and loan repayment programs) contributed to large numbers of healthcare workers working in underserved areas.Till Bärnighausen and David E. Bloom, “Financial Incentives for Return of Service in Underserved Areas: A Systematic Review,” BMC Health Services Research 9 (2009). In addition, participants in these programs were more likely than non-participants to work in underserved areas in the long run.Ibid. One study of state loan repayment programs and service scholarships for physicians who committed to work in underserved communities for a designated period of time found that 93% of participants completed their commitment, and approximately two-thirds remained in these communities for more than eight years.Donald E. Pathman et al., “Outcomes of States’ Scholarship, Loan Repayment, and Related Programs for Physicians,” Medical Care 42, no. 6 (2004): 560–68. Another study of 229 medical students found that students who were more competitive at the time of their admission to medical school were more likely to say that they would be less likely to accept a service scholarship if it contained a penalty provision.John Bernard Miller and Robert A. Crittenden, “The Effects of Payback and Loan Repayment Programs on Medical Student Career Plans,” Journal of Rural Health 17, no. 3 (2001): 160–64. In addition, 48% said they would be more likely to return to an underserved community in their home state if they received loan forgiveness to do so.Ibid.

Loan Forgiveness & Service Scholarship Programs for Teachers

The federal government and more than 40 states offer loan forgiveness and/or service scholarship programs to individuals interested in teaching.Li Feng and Tim R. Sass, “The Impact of Incentives to Recruit and Retain Teachers in ‘Hard-to-Staff’ Subjects,” Working Paper 141, National Center for Analysis of Longitudinal Data in Education Research (2015). These programs are typically smaller and less consistently available than those for the medical profession. Nonetheless, the research that exists indicates that well-designed programs can influence the recruitment and retention of talented teachers in high-need areas and locations.

The more debt college students incur, the less likely they are to choose to work in a lower-wage profession. A recent study of students at a highly selective undergraduate institution found that incurring debt increased the odds that students chose “substantially higher-salary jobs” and “reduce[d] the probability that students [chose] low-paid ‘public interest’ jobs.” The influence of debt on job choice was “most notable on the propensity to work in the education industry.”Jesse Rothstein and Cecilia Elena Rouse, “Constrained after College: Student Loans and Early-Career Occupational Choices,” Journal of Public Economics 95, no. 1–2 (2011): 149–63. In other words, the top-performing students were more likely to pursue a career in education when they did not have a large debt. Other research has found that minority students and students from low-income households perceive student loans as a greater burden than other students with similar student debt earning similar salaries.Sandy Baum and Marie O’Malley, “College on Credit: How Borrowers Perceive Their Education Debt,” Journal of Student Financial Aid 33, no. 3 (2003): 7–19. This research suggests that loan forgiveness and service scholarships may be especially effective for recruiting teacher candidates from low-income and minority backgrounds.

Research on loan forgiveness and service scholarship programs for teachers has found these programs are effective at attracting individuals into the teaching profession and particularly into high-need schools. For example, the National Science Foundation Robert Noyce Teacher Scholarship provides scholarships for prospective teachers in science, technology, engineering, and mathematics who commit to teach in high-need schools for at least two years per each year of funding. A 2007 survey of 555 recipients found that 56% of recipients identified the scholarship as influential in their decision to complete a teacher certification program. Approximately 70% of recipients noted that the scholarship influenced their commitment to teach in a high-need school and remain in such a school for the full term of their commitment.Pey Yan Liou, Allison Kirchhoff, and Frances Lawrenz, “Perceived Effects of Scholarships on STEM Majors’ Commitment to Teaching in High Need Schools,” Journal of Science Teacher Education 21, no. 4 (2010): 451–70. The higher the percentage of tuition covered by the scholarship, the greater the influence the funding had on the recipients’ decisions to become teachers and to teach in high-need schools.Pey-Yan Liou and Frances Lawrenz, “Optimizing Teacher Preparation Loan Forgiveness Programs: Variables Related to Perceived Influence,” Science Education Policy 95, no. 1 (2011): 139.

A study of the Woodrow Wilson Fellowship program found that its recipients were more likely to teach students in high-need schools and more effective teachers. The program provides a one-year $30,000 service scholarship to high-achieving candidates who complete a master’s degree program in a STEM-focused teacher preparation program and commit to teach in a high-need school for three years. Based on data from the first year of the program in Michigan, the study found that recipients were two times more likely to teach low-income students and three times more likely to teach English language learners, as compared to non-fellows. The study also found that in Indiana, which had multiple years of data, recipients were more effective than both experienced and inexperienced non-recipients at raising minority students’ test scores in middle-school math, middle-school science, and algebra. Recipients were also almost twice as likely to persist in Indiana’s public high-needs schools as compared to non-recipients.The study’s findings are from an independent external assessment performed by the Center for the Analysis of Longitudinal Data in Education Research at the American Institute of Research, as reported in Woodrow Wilson Foundation, “Answering the Call for Equitable Access to Effective Teachers: Lessons Learned From State-Based Teacher Preparation Efforts in Georgia, Indiana, Michigan, New Jersey, and Ohio,” The Woodrow Wilson National Fellowship Foundation (Princeton, NJ: 2015).

A study of California’s Governor’s Teaching Fellowship (GTF) program, which also looked at participants in California’s Assumption Program of Loans for Education (APLE) loan forgiveness program, found that both programs had attracted teachers to low-performing schools and kept them in these schools at rates higher than the state average retention rate, despite such schools usually having much higher attrition.The retention rate of the state-subsidized teachers was 75% in disadvantaged schools. (See Jennifer L. Steele, Richard J. Murnane, and John B. Willett, “Do Financial Incentives Help Low-Performing Schools Attract and Keep Academically Talented Teachers? Evidence from California,” Journal of Policy Analysis and Management 29, no. 3 (2010): 451–78.) Meanwhile, the overall teacher retention rate for teachers with five years of experience was found to be about 74% in a statewide study around the same point in time. (See Deborah Reed, Kim S. Rueben, and Elisa Barbour, Retention of New Teachers in California (San Francisco: Public Policy Institute of California, 2006)). In exchange for teaching at least four years in a low-performing school, APLE provided loan forgiveness of $11,000 to $19,000, while the GTF provided $20,000 scholarships to a more selective group of prospective teachers.California Student Aid Commission, “2006-07 Annual Report to the Legislature” (California Student Aid Commission, 2007). The authors of the study suggest that the GTF recipients “had weaker predispositions” to teach in low-performing schools than the non-recipients in their study (i.e., individuals who only received APLE loan forgiveness), and that about two of every seven fellowship recipients would not have taught in such schools in the absence of the incentive.Jennifer L. Steele, Richard J. Murnane, and John B. Willett, “Do Financial Incentives Help Low-Performing Schools Attract and Keep Academically Talented Teachers? Evidence from California,” Journal of Policy Analysis and Management 29, no. 3 (2010): 451–78.

In 2003, the Illinois Student Assistance Commission conducted a study of the state’s two loan forgiveness programs that provided $5,000 for each year of postsecondary schooling in exchange for a one-year teaching commitment per each year of subsidy. It found that, of the 1,167 recipients who had passed the grace period of loan deferment, 86% were repaying or had repaid their loans through teaching and 14% were pursuing other careers. Of those who received and accepted teaching positions after graduation, 43% indicated the program was very influential in their decision to become a teacher.Illinois Student Assistance Commission, “Recruiting Teachers Using Student Financial Aid: Do Scholarship Repayment Programs Work?,” (Deerfield, IL: Illinois Student Assistance Commission, 2003).

Additional research suggests that loan forgiveness and scholarship programs also attract high-quality individuals to the teaching profession. A survey of 400 National and State Teachers of the Year found that 75% and 64% of the teachers said that “scholarship programs for education students” and “student loan forgiveness programs” were the most effective recruitment strategies for new teachers, respectively.Phyllis E. Goldberg and Karen M. Proctor, “Teacher Voices” (Scholastic/CCSSO Teacher Voices Survey, 2000): 6.

A longitudinal study of the North Carolina Teaching Fellows Program (see below)—a long-standing scholarship program that recruited high-ability high school graduates and provided them an enhanced teacher preparation program in exchange for a commitment to teach for at least four years in the state—found that these fellows not only had higher rates of retention, but they were also generally more effective educators than their peer teachers as measured by test score gains of their students.Gary T. Henry, Kevin C. Bastian, and Adrienne A. Smith, “Scholarships to Recruit the ‘Best and Brightest’ Into Teaching: Who Is Recruited, Where Do They Teach, How Effective Are They, and How Long Do They Stay?,” Educational Researcher 41, no. 3 (2012): 83–92. As shown in Figure 1, more than 90% of Teaching Fellows returned for a third year, and 75% returned for a fifth year, as compared to other in-state prepared teachers (80% and 68% respectively).Ibid at 90.

A recent study of the Florida Critical Teacher Shortage Program (FCTSP) suggests that loan forgiveness payments to teachers in hard-to-staff subject areas contribute to their decisions to stay in the profession, as long as they are receiving the financial stipend.Feng and Sass, “The Impact of Incentives to Recruit and Retain Teachers in ‘Hard-to-Staff’ Subjects.” The FCTSP provided loan forgiveness of $2,500 per year to undergraduates and $5,000 per year to graduates, up to $10,000. The study found that loan forgiveness “significantly reduces the probability of exit” for teachers of middle- and high-school math and science, foreign language, and English as a Second Language.Ibid.

While numerous studies have found that loan forgiveness or service scholarship programs covering a significant portion of tuition and/or living costs are effective in recruiting teachers into the profession and especially into high-need schools and fields, some studies have found that programs that provide small amounts are not effective. A study of the Arkansas State Teacher Education Program suggests that the small amount of money—on average $3,000 per year—provided to teachers who taught in high-need districts was too low to attract teachers given the much higher salaries in nearby districts.Robert Maranto and James V. Shuls, “How Do We Get Them on the Farm? Efforts to Improve Rural Teacher Recruitment and Retention in Arkansas,” Rural Educator 34, no. 1 (2012): n1. In another study, 82% of surveyed recipients of Oklahoma Future Scholarships, which range from $1,000 to $1,500, reported that they would have gone into teaching science (the focus of the scholarship) even without the scholarship.Kay S. Bull, Steve Marks, and B. Keith Salyer, “Future Teacher Scholarship Programs for Science Education: Rationale for Teaching in Perceived High-Need Areas,” Journal of Science Education and Technology 3, no. 1 (1994): 71–76. Again, the small amount of the scholarship suggests that minor financial stipends do little to attract individuals into teaching in hard-to-staff schools and subjects who would not otherwise be interested.

A U.S. Government Accountability Office (GAO) study of federal grant and loan forgiveness programs for teachers suggests that how a program is structured also influences its success. In reviewing the TEACH grant program, which provides up to $16,000 in grants to prospective teachers who agree to teach in a low-income school and high-need subject area for four years, the GAO found that one-third of TEACH grant recipients did not fulfill the grant requirements. Instead, their grants were converted to unsubsidized federal loans, with high levels of interest accrued over several years. The GAO criticized the program’s design and management, including the requirement that participants submit burdensome annual paperwork as well as an ineffective appeals process for recipients whose grants had been erroneously converted to loans.United States Government Accountability Office, “Better Management of Federal Grant and Loan Forgiveness Programs for Teachers Needed to Improve Participant Outcomes,” (Washington, D.C.: United States Government Accountability Office, 2015).


Existing research on teacher loan forgiveness and service scholarship programs suggests that, when the financial benefit meaningfully offsets the cost of a teacher’s professional preparation, these programs can be successful in both recruiting and retaining teachers. Research suggests that the following five design principles could guide the development of loan forgiveness and service scholarship programs:

  1. Covers all or a large percentage of tuition.
  2. Targets high-need fields and/or schools.
  3. Recruits and selects candidates who are academically strong, committed to teaching, and well-prepared.Linda Darling-Hammond and Gary Sykes, “Wanted: A National Teacher Supply Policy for Education: The Right Way to Meet the ‘Highly Qualified Teacher’ Challenge,” Education Policy Analysis Archives 11, no. 33 (2003): 1–55; Christopher Day, Bob Elliot, and Alison Kington, “Reform, Standards and Teacher Identity: Challenges of Sustaining Commitment,” Teaching and Teacher Education 21, no. 5 (2005): 563–77.
  4. Commits recipients to teach with reasonable financial consequences if recipients do not fulfill the commitment (but not so punitive that they avoid the scholarship entirely).Many programs provide for leaves of absences or non-consecutive commitments if recipients experience serious illness, military service, pregnancy, other unexpected causes, or reassignments to teaching positions that are beyond their control. Research also suggests that financial consequences for not fulfilling the commitments associated with service scholarships should not be so punitive that recipients avoid the scholarship entirely. Donald E. Pathman, “What Outcomes Should We Expect from Programs that Pay Physicians’ Training Expenses in Exchange for Service,” NC Med J 67, no.1 (2006): 77–82.
  5. Bureaucratically manageable for participating teachers, districts, and higher education institutions.

Importantly, research finds that these programs are effective at attracting strong teachers into the profession generally and into high-need schools and fields in particular. Research also finds that these programs are successful in promoting teacher retention. Teacher loan forgiveness and service scholarship programs provide states and districts with options for addressing the high rate of attrition at disadvantaged schools that occurs when schools must recruit candidates without the preparation or incentives that would strengthen their commitment.See, e.g., David M. Miller, Mary T. Brownell, and Stephen W. Smith, “Factors that predict teachers staying in, leaving, or transferring from the special education classroom,” Exceptional Children 65, no. 2 (1999): 201-218; Erling E. Boe, Lynne H. Cooke, and Robert J. Sunderland, “Attrition of Beginning Teachers: Does Teacher Preparation Matter?,” Research Report No. 2006-TSDQ2 (Philadelphia, PA: Center for Research and Evaluation in Social Policy, Graduate School of Education, University of Philadelphia, 2006).

External Reviewers

This brief benefited from the insights and expertise of three external reviewers: Li Feng, Associate Professor of Economics at Texas State University-San Marcos; Rachel Lotan, Emeritus Professor at Stanford Graduate School of Education; and Barnett Berry, founder and CEO of the Center for Teaching Quality. We thank them for the care and attention they gave the brief. Any remaining shortcomings are our own.

How Effective Are Loan Forgiveness and Service Scholarships for Recruiting Teachers? by Anne Podolsky and Tara Kini is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.