Federal Student Loan Forgiveness Scams

Federal Student Loan Forgiveness Scams

The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process for forgiveness of Paycheck Protection Program loans, along with newly updated and revised forms to meet the requirements of the latest stimulus legislation. 

The COVID-19 relief plan that Congress passed last month revived the PPP with $284 billion in funds for small businesses that want forgiveness loans to help them cope with the economic fallout of the coronavirus epidemic. The law requires that the SBA release simplified forms within the first 24 hours after the bill’s passage into law. This was done to make it easier to apply for forgiveness. It also included conditions to encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans in the past.

Federal Student Loan Forgiveness Scams

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs and stated that the Small Business Administration fulfilled the requirement to publish the PPP form, which is one page long, for loan forgiveness within the first 24 hours from the date of enactment in the Consolidated Appropriations Act, 20,21. This was published on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released new forms that were updated.”

Forgiveness terms in the initial draw of PPP loans

Federal Student Loan Forgiveness Scams – First Draw PPP loans made to borrowers who are eligible can be granted total loan forgiveness within the 8-to 24-week period after loan disbursement:

  • The levels of compensation and employee pay are ensured
  • The proceeds of the loan can be used to cover the cost of payroll as well as other eligible expenses.
  • Minimum 60% of funds go to the cost of payroll

Second Draw PPP Loan forgiveness terms

Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is repaid within an 8– to 24 week period.

  • Pay and worker levels are kept in the same way as required for the First Draw PPP loan
  • The loan proceeds could be used to cover expenses for payroll or other expenses that are eligible.
  • A minimum of 60% of profits are used to pay for payroll expenses
  • When and how do I apply for loan forgiveness

A borrower may apply for forgiveness once the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any time until the date of maturity. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are eligible to receive payment from their PPP lender.

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Gallery of Federal Student Loan Forgiveness Scams


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