Teacher Loan Forgiveness in Indiana: Federal, PSLF, and State Programs

Teachers working in Indiana have two main paths to federal student loan forgiveness: the federal Teacher Loan Forgiveness program, which cancels up to $17,500 for five years of service at a low-income school, and Public Service Loan Forgiveness (PSLF), which wipes out the remaining balance on Direct Loans after 120 qualifying payments made while working for a government or nonprofit employer. Indiana does not run its own teacher loan forgiveness program, but the state offers scholarships and stipends that can reduce debt before it accrues. Teacher loan forgiveness in Indiana also carries a tax wrinkle worth knowing before you count on the benefit.

Federal Teacher Loan Forgiveness

The federal Teacher Loan Forgiveness program cancels up to $17,500 for secondary math and science teachers and special education teachers who meet “highly qualified” standards, and up to $5,000 for other eligible full-time teachers.¹ To qualify, you must complete five complete and consecutive academic years of full-time teaching, with at least one year falling after the 1997–98 school year.²

The program covers Direct Loans and Federal Family Education Loan (FFEL) Program loans. You cannot have had an outstanding balance on either loan type as of October 1, 1998, or on the date you first borrowed after that date.¹ Direct PLUS Loans, FFEL PLUS Loans, and Perkins Loans are not eligible.² Defaulted loans don’t qualify either, unless you’ve made satisfactory repayment arrangements.

Which Indiana Schools Qualify

Your five years must be served at a school listed in the federal Teacher Cancellation Low Income (TCLI) Directory. Schools make the list when they’re in a district that qualifies for Title I funds and more than 30 percent of enrolled students are eligible for Title I services.² Bureau of Indian Education schools also qualify.

Check your school year by year on the federal Student Aid TCLI Directory, filtering by state and year.³ The directory is rebuilt from data Indiana reports to the Department of Education, so a school’s status can change from one year to the next. One point of confusion worth clearing up: a TCLI-listed low-income school is not the same thing as a designated teacher shortage area, which is tracked on a separate federal list.⁴

How and When to Apply

You cannot apply until you’ve finished all five consecutive years. Once you have, download the Teacher Loan Forgiveness Application from the Federal Student Aid site or request it from your loan servicer.⁵ The chief administrative officer at your qualifying school must complete the certification section. If you taught at more than one qualifying school during the five years, you may need additional documentation from each. Send the completed form to your loan servicer, which will place your eligible loans in forbearance while it reviews your application.

Public Service Loan Forgiveness for Indiana Teachers

PSLF cancels the entire remaining balance on Direct Loans after you make 120 qualifying monthly payments while working full-time for a qualifying employer.¹ Qualifying employers include government agencies at any level and 501(c)(3) nonprofits, which covers most Indiana public schools and many charter and private nonprofit schools. The school does not have to be low-income.

PSLF requires an income-driven repayment plan, and the available plans are in flux. The SAVE plan was terminated through a court-approved settlement between the Department of Education and the State of Missouri, finalized in December 2025.⁶ PAYE and ICR are also being phased out. A new income-driven option, the Repayment Assistance Plan (RAP), launched July 1, 2026, and qualifies for PSLF.⁷ Borrowers still on SAVE, PAYE, or ICR need to switch to IBR or RAP before July 1, 2028, or they’ll be auto-enrolled in RAP.

A New Rule on Employer Eligibility

On October 30, 2025, the Department of Education finalized a regulation, effective July 1, 2026, giving the Secretary of Education authority to disqualify PSLF employers found to operate with a “substantial illegal purpose.”⁸ The rule is prospective and does not strip credit for payments already made. Employers keep qualifying status during any review and can rebut findings. If an employer is ultimately disqualified, you keep credit for every month of service through the determination date but need to find a new qualifying employer to continue earning payments toward the 120.

Choosing Between the Two Programs

You can use both Teacher Loan Forgiveness and PSLF, but not for the same period of service. Payments made during the five years that count toward TLF do not count toward the 120 PSLF payments.¹ Running them sequentially (TLF first, then PSLF) effectively restarts the 120-payment clock, pushing the total timeline toward 15 years.

For teachers with large balances and modest incomes, PSLF alone often delivers more relief, because it can erase the entire remaining balance rather than cap out at $17,500. Teachers with smaller balances who already work at a TCLI school may find TLF faster and simpler. The Department of Education’s Loan Simulator can run the comparison on your actual numbers.

How Indiana Taxes Forgiven Loans

Indiana is a static conformity state, which means its tax code locks to the Internal Revenue Code as of a fixed date and the General Assembly decides whether to adopt federal changes. When the American Rescue Plan Act temporarily made forgiven student loans tax-free federally, Indiana decoupled. Many types of federal student loan forgiveness are therefore treated as taxable income for Indiana state and local tax purposes.⁹

The important exceptions for teachers: Teacher Loan Forgiveness and PSLF are not taxed by Indiana. Discharges due to disability, death, or bankruptcy are also excluded.⁹ Other forgiveness, including amounts canceled at the end of an income-driven repayment plan, must be added back to Indiana adjusted gross income using code 150 on Schedule 1 of the IT-40, and you’ll owe both state income tax and applicable county and local taxes on that amount.

Indiana State Programs That Reduce Teacher Debt

Indiana does not run a state loan forgiveness program for teachers.¹⁰ What it offers instead are scholarships and stipends that prevent debt from piling up, each tied to a teaching commitment.

Next Generation Hoosier Educators Scholarship

Administered by the Indiana Commission for Higher Education, this renewable scholarship pays up to $7,500 a year, up to $30,000 over four years, toward college at an eligible Indiana institution.¹¹ You need Indiana residency, enrollment in a program leading to an Indiana teaching license, a GPA of at least 3.0, and 30 credit hours per year.

The service obligation is five years teaching full-time at an eligible Indiana K–12 school after you get your Indiana license. Fall short, and the scholarship converts to a loan. The repayment penalty is 20 percent of the total award for each year of service not completed, plus interest. Recipients sign a promissory note before any funds go out.

Student Teaching Stipend for High-Need Fields

The Commission for Higher Education also offers a stipend of up to $4,000 for student teachers working toward licensure in special education, middle or high school math, or middle or high school science.¹² You need to be a first-time undergraduate at an eligible Indiana institution, file the FAFSA, and apply through the state’s ScholarTrack portal. In exchange, you commit to applying for a teaching job at an accredited Indiana school after you’re certified, and if hired, to teach for at least three years.

STEM Teacher Programs

The Indiana STEM Teacher Recruitment Fund, created by the General Assembly in 2013 under Indiana Code 21-13-11, funds nonprofits that work to grow the supply of STEM teachers in underserved Indiana school corporations, including charters.¹³

The Indiana STEM Educator Expansion Program (I-STEM), a partnership between the Central Indiana Educational Service Center and the Indiana Department of Education, offers reimbursements and stipends rather than loan forgiveness. Tier I helps career changers with a bachelor’s degree pay for a transition-to-teaching program, with up to $6,000 toward the program plus stipends totaling up to $2,500 for passing licensure exams and securing a teaching position. Tier II gives already-licensed teachers adding a STEM endorsement exam reimbursement and a $1,500 stipend after completing the endorsement and teaching in a STEM role.¹⁴

1
Federal Student Aid. Teacher Loan Forgiveness Options
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MOHELA. Teacher Loan Forgiveness
3
Federal Student Aid. Teacher Cancellation Low Income Directory
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U.S. Department of Education. Teacher Shortage Areas
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Federal Student Aid. Teacher Loan Forgiveness Application
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U.S. Department of Education. Next Steps for Borrowers Enrolled in Unlawful SAVE Plan
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American Federation of Teachers. Public Service Loan Forgiveness
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U.S. Department of Education. Fact Sheet: Restoring Public Service Loan Forgiveness to Its Statutory Purpose
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Indiana Department of Revenue. Student Loans
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Teach Indy. Loan Forgiveness and Awards
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Indiana Commission for Higher Education. Next Generation Hoosier Educators Scholarship FAQ
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Indiana Commission for Higher Education. Student Teaching Stipend for High-Need Fields
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Indiana Commission for Higher Education. STEM Teacher Recruitment Grant Request for Proposal
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Keep Indiana Learning. Indiana STEM Educator Expansion Program