Getting Calls About Student Loan Forgiveness

Getting Calls About Student Loan Forgiveness

The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the current stimulus law. 

The COVID-19 aid package Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiven loans to help to deal with the effects of economic collapse from the coronavirus pandemic. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was to simplify the process of applying for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more particularly to minority-owned businesses who had a difficult time getting loans last year.

Getting Calls About Student Loan Forgiveness

“The Small Business Administration met the requirement to issue the single-page form for loan forgiveness under the PPP within 24 days 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 released new forms.”

First Draw PPP Terms of loan forgiveness

Getting Calls About Student Loan Forgiveness – First Draw PPP loans given to borrowers who meet the criteria are eligible for total loan forgiveness within the 8 to 24-week covered period following loan disbursement:

  • This is also true for compensation and employees.
  • The loan funds are used on payroll expenses as well as other expenses eligible for reimbursement; and
  • At least 60% of the profits are used to pay for payroll expenses

Second Draw PPP Loan Forgiveness Conditions

Second Draw PPP loans to eligible borrowers can be eligible for loan repayment when the loan is paid within an 8– to 24-week period.

  • Employee and compensation levels are kept in the same way as is required for the First Draw PPP loan
  • The loan funds are used on payroll costs and other eligible expenses; and
  • At least 60% of proceeds are used to pay for payroll expenses
  • How and when to apply for loan forgiveness

Once all of the loan’s proceeds have been used, a borrower can apply to be granted forgiveness. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months after the end of the period covered and the loan is not renewed, PPP loan payments are no longer deferred, and the borrower will be required to make monthly payments to their PPP lender.

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