Economic Impact Of Student Loan Forgiveness

The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, together with updated and revised forms that meet the requirements of the most recent stimulus legislation. 

Congress approved the COVID-19 relief plan last month that included $284 billion of financing for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within the first 24 hours of the bill being approved by the lawmaker to streamline the procedure of applying for forgiveness. It also included conditions designed to facilitate more bank loans by community banks, specifically for minority-owned companies that were unable to obtain loans in the past.

Economic Impact Of Student Loan Forgiveness

“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness by 24 days after the date of enactment 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 released updated forms.”

Forgiveness terms in the initial draw of PPP loans

Economic Impact Of Student Loan Forgiveness – First Draw PPP loans made to eligible borrowers qualify for total loan forgiveness during the 8- to 24 week period that follows the disbursement of loan:

  • Employee and compensation levels are ensured
  • The proceeds from the loan may be used to cover expenses for payroll or other eligible expenses.
  • At least 60% of the proceeds are used for the cost of payroll

Second Draw PPP Loan forgiveness terms

Second Draw PPP loans given to borrowers who are eligible can be granted total loan forgiveness if they do so during the 8– to 24-week duration following loan payment:

  • The First Draw PPP loan requires that the employee and compensation levels are maintained in the exactly the same manner.
  • The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
  • At least 60% of the proceeds are used for the cost of payroll
  • How to request loan forgiveness and when to apply

The borrower is eligible for forgiveness after the loan’s proceeds for which the borrower wants forgiveness have been utilized. The borrower can request forgiveness at any time prior until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 months of the end date of the loan are eligible to receive payment from their PPP lender.

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