Education & Distance Learning Enthusiasts- B Is For Bonus

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B Is For Bonus - attracting new teachers

Kiplinger's Personal Finance Magazine - May 1, 2001

STARTING OUT School districts are sweetening the pot to attract NEW TEACHERS.

BILL TRIANT was a Harvard senior studying history and literature in the spring of 1999 when the commonwealth of Massachusetts made him an offer he couldn't refuse. Desperate for teachers, the state was recruiting college graduates and mid-career professionals to teach math, science and foreign languages in its public schools. The newly hired teachers would attend a free, seven-week summer training program--and would get a $20,000 signing bonus, payable over a four-year teaching commitment.

Triant was one of 59 chosen for the program in its first year, beating out more than 700 other applicants. Since then, he has taught economics and entrepreneurship to juniors and seniors at Charlestown High School, in the Boston public-school system. "At this point in my life, I want to enjoy the work I do," says Triant, 24, who had been considering a teaching career since he was in high school. The bonus was the extra incentive he needed to join a profession that has never been among the most financially rewarding.

At the same time that thousands of older teachers are retiring, public schools are facing a tidal wave of enrollments, expected to peak in 2006, as the children of baby-boomers grow up. To avert a nationwide crisis, the U.S. Department of Education anticipates that school districts will have to hire more than two million teachers over the next several years. Compounding the problem are state mandates that require fewer students per classroom, and the lucrative lure of private industry.

As administrators scramble to fill teaching positions, school districts across the country are being forced to raise starting salaries and dole out goodies such as home-buying assistance, student-loan reimbursement, and signing bonuses and stipends worth thousands of dollars. Faced with the most acute shortages, urban school districts generally offer the most generous incentives. But even rural states such as Iowa are jumping on the benefits bandwagon to keep teachers from fleeing to better-paying states.

Catching up. The average starting pay for teachers was $26,639 in 1999, according to the most recent data from the American Federation of Teachers (AFT), which conducts an annual survey. By comparison, college graduates earned an average of $37,000 in their first year on the job. Of course, "teachers work nine and a half months out of the year," says Hector Flores, director of recruitment and retention for the Dallas public schools, which currently pay beginning teachers $33,000.

Teacher salaries are rising--up 11% since 1995--but the rate of increase was the slowest of any field measured by the AFT. One reason for the slow growth is the way teachers are compensated. In contracts negotiated by their unions, teachers are generally paid based on their length of service and level of education, according to a set pay scale. That means salaries can't fluctuate to meet the demand for instructors in certain subjects. B.J. Bryant, executive director of the American Association for Employment in Education, says she once asked a group of school officials why they weren't paying special-education teachers $60,000 and health-ed teachers $20,000. "If those folks had had tomatoes," says Bryant, "I would have looked like pasta sauce."

Because school districts can't afford significant across-the-board raises, and may not pay substantially more to staff members who are in short supply, they resort to signing bonuses, stipends or both to boost the pay of teachers they need most, especially in math, science and special ed, and bilingual teachers in all subjects. While schools prefer education majors, administrators in at least 40 states hire people who have college degrees in other subjects.

Instructors with degrees in fields other than education receive the same starting salary and incentives as trained teachers, but must earn and pay for their teaching credentials on the job. That coursework, which costs at least $2,500, can wipe out the modest, one-time signing bonus of $2,000 or $3,000 that schools generally pay for a one-year teaching commitment. (In some cases, a new hire may get a stipend of $1,000 or more on top of the bonus.)

The Massachusetts program, now in its third year, pays its $20,000 bonuses (the most generous in the nation) to about 100 new teachers who are admitted and trained each year. Another 60 applicants get full scholarships for teacher training but no bonuses.

Triant used part of his money to buy a car. He plans to save the rest to help pay for a master's degree in business and education, which he intends to pursue after fulfilling his teaching commitment.

Other perks. All teachers, including those in private schools, are eligible for some perks, such as assistance in buying a house. For example, Bank of America offers mortgage loans of up to $252,700 to teachers nationwide, so they can buy a house with little or no down payment. If your credit is clean, you qualify for 100% financing. If there are blemishes on your credit record, you may have to deposit up to 3% of the home's cost. Even with 100% financing, you qualify for the same interest rate as nonteachers who make a 20% to 30% down payment--a savings of as much as two percentage points on the rate you'd normally pay for a no-money-down loan. Bank of America was recently charging 7.25% for zero-down-payment teacher loans.

When Shannon Orchard, a science teacher in Dallas, bought her three-bedroom house in a nearby suburb through the Bank of America program two years ago, she had to come up with only $2,000 in closing costs. And the interest-rate break allowed her to afford a house that was "in livable condition."

Through the Department of Housing and Urban Development's Teacher Next Door program, certified teachers in more than 750 communities around the country get a 50% discount on houses that are in HUD's inventory because of foreclosure. The house must be located in the public-school district where you work, and you must live in the home for at least three years. A number of cities offer additional housing assistance. Baltimore, for instance, contributes $5,000 toward the closing costs on any house in the city purchased by a teacher.

One of the fastest-growing teacher incentives is student-loan reimbursement. California forgives up to $11,000 in student loans for teachers of critical subjects who spend four years working in schools in low-income and rural areas. In some Iowa school districts, you can have all of your student loans forgiven if you teach there for five years.

Under a new law, the federal government's Stafford loan program will write off up to $5,000 for borrowers who took out loans after October 1, 1998, if they teach in certain low-income schools for five consecutive years. The list of designated schools is still being determined, but it could be the same list now used to forgive up to 100% of Perkins student loans for teachers. --Reporter: KATHY JONES

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