Cares Act Student Loan Forgiveness

Cares Act Student Loan Forgiveness

The U.S. Small Business Administration issued a one-page application form aimed at simplifying the process of applying to forgive Paycheck Protection Program loans, together with revised and updated forms to comply with the most recent stimulus legislation. 

Congress approved the COVID-19 relief package last month, which included $284 billion of financing for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The law requires that the SBA provide simplified forms within the first 24 hours of the legislation’s signing into law. This is to facilitate the application for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans, especially to minority-owned businesses who were unable to obtain loans in the past.

Cares Act Student Loan Forgiveness

“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued more updated forms.”

Terms for forgiveness for the initial draw of PPP loans

Cares Act Student Loan Forgiveness – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8 to 24-week period after loan disbursement:

  • Employee and compensation levels are maintained
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • A minimum of 60% of the funds go to expenses for payroll

Second Draw PPP Conditions for loan forgiveness

Second Draw PPP loans to qualified borrowers can be qualified for loan forgiveness when the loan is repaid within an 8 24-week time frame.

  • Pay and worker levels are kept in the same way in accordance with the First Draw PPP loan
  • The loan proceeds are used on payroll expenses and other eligible expenses; and
  • A minimum of 60% of the proceeds are used to pay for payroll expenses
  • How to apply for loan forgiveness , and when to apply

The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been utilized. The borrower can request forgiveness anytime up to the maturity date of the loan. If they do not file for forgiveness within 10 months after the date of expiration of the time period that was covered the PPP loan payments can no longer deferred and borrowers will begin making monthly payments to their PPP lender.

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