Payouts from Michigan’s teacher loan program plummet 97% after rule change

Michigan’s student-loan assistance for educators declined significantly in 2025, according to the state’s education department.

The state has directed about $250 million to pay off educators’ loans under its Student Loan Repayment Program. The program paid out $21.7 million to nearly 10,000 educators in 2024, the first year it was operation, according to a Dec. 18 update from the Michigan Department of Education

But in 2025, that figure dropped to about $600,000, a decrease of 97%.

Student Loan Repayment Program Update by mcclallen

When Michigan shuttered about 10 million people in their homes during COVID-19, residents were forced to turn to online shopping, a shift that boosted revenue to the School Aid Fund, which receives money from the state’s 6% sales tax.

In fiscal year 2024, the top three sources of revenue for the School Aid Fund were sales and use taxes (39.7%), personal income taxes (16.8%) and federal revenue (15.9%).

Many state officials say Michigan has a teacher shortage. So in fiscal year 2024, the Michigan Department of Education awarded about $21.7 million from the Student Loan Repayment Program to nearly 10,000 educators.

Michigan’s 800-plus school districts were responsible for carrying out the plan. The program didn’t provide a clear application system, so there were more than 800 different systems for applying for assistance.

By the next year, school districts didn’t want the workload. Lawmakers tweaked the program for the 2025 budget. Individual educators, not school districts, were to submit applications to the Student Loan Repayment Program.

Opening the application process to the public heightened the need to verify the identities and qualifications of applicants. As a result, the number of denied applications soared, leading to the program distributing only $600,000 awarded in FY 2025.

The most common reasons for denial included:

• Missing applicant-identifying information (e.g., name or account number), which prevented verification and document matching.
• Insufficient documentation to confirm the monthly payment amount due.
• Insufficient documentation to confirm current participation in the federal Public Service Loan Forgiveness program.

The Michigan Department of Education aims to boost teacher pay and offset their costs, Bob Wheaton, spokesperson for the department, told Michigan Capitol Confidential in an email.

The Michigan Department of Education is doing everything it can to increase compensation and offset costs for educators, Wheaton said. The repayment program aims to boost teacher retention and is part of Michigan's Top 10 Strategic Education Plan.

In 2026, lawmakers shuttered the loan repayment program. Instead, that money will be reallocated as a formula grant to districts to increase educator compensation. A new law aims to provide over $450 million to districts to increase educator compensation and offset costs associated with retiree health care benefits.