Teachers can strategically use Federal Student Loans to pay for college and graduate school, given the loan forgiveness available to them.

For undergraduate school, the student should borrow the maximum Federal Loan amount of $27,000 ($5,500 for the first year, $6,500 for the sophomore year, and $7,500 for the junior and senior years). They should consider borrowing even if they have enough to pay for undergraduate school. The key is to avoid private student loans since these cannot be forgiven.

For graduate school, the student can borrow up to the cost of attendance through federal loans. Even if they can afford to pay for graduate school as they go, they should consider borrowing.

Let's look at some student loan scenarios for a teacher:

As you can see, a teacher who borrows for grad school does not pay any more money on their loans than a teacher who borrowed for undergrad. This is why I believe a teacher should never pay for grad school out of pocket.

• In the undergrad-only example, they borrow $27,000 but only pay $26,219 over 10 years before they reach Public Service Loan Forgiveness (PSLF). This example shows an effective interest rate of -0.29%, so there is no incentive to repay this loan quickly.

• In the undergrad and graduate school example, they borrow $50,000 but only pay the same $26,219 over 10 years before they reach Public Service Loan Forgiveness (PSLF). This example shows an effective interest rate of -4.76%, so there is no incentive to repay this loan quickly.

In either example, you can see that as long as you know you will become a teacher and work for at least 10 years, there is an incentive to borrow as much in Federal Loans as possible because of PSLF.