How Long Before Student Loans Can Be Forgiven

The U.S. Small Business Administration issued a one-page application form aimed at simplifying the application process to forgive Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the most recent stimulus legislation. 

The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funding for small businesses seeking forgivable loans to help them to deal with the effects of economic collapse 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 simplify the process of applying for forgiveness. It also included conditions that would encourage community banks to lend more specifically to minority-owned companies who were unable to obtain loans last year.

How Long Before Student Loans Can Be Forgiven

“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans within 24 days of the date of the 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 new forms that were updated.”

Forgiveness terms in the initial draw of PPP loans

How Long Before Student Loans Can Be Forgiven – First Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if within the 8-to 24 week period that follows the disbursement of loan:

  • Pay and worker levels are ensured
  • The loan proceeds are used on payroll costs and other expenses that are eligible and
  • A minimum of 60% of the profits are spent on payroll costs

Second Draw PPP Loan Forgiveness Conditions

Second Draw PPP loans for eligible borrowers are eligible for loan forgiveness when the loan is repaid within an 8 24-week time frame.

  • The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
  • The loan proceeds are spent on payroll expenses as well as other eligible expenses and
  • A minimum of 60% of the proceeds are used for the cost of payroll
  • How do I apply for loan forgiveness , and the time to apply

A borrower may apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been utilized. The borrower can apply for forgiveness at any time up to the loan’s maturity date. If they do not file for forgiveness within 10 months after the date of expiration of the period covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers will begin making monthly payments to their PPP lender.

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