New Legislation Student Loan Forgiveness

New Legislation Student Loan Forgiveness

The U.S. Small Business Administration has issued a one-page form that simplifies the application for the cancellation of Paycheck Protection Program loans. It also includes newly revised forms that are in line with the current stimulus legislation. 

The COVID-19 relief package that Congress passed last month revived the PPP with $284 billion of funding for small businesses seeking forgiveness loans to help them to deal with the effects of economic collapse from the coronavirus pandemic. The package also mandated the SBA to issue streamlined forms within the first 24 hours after the legislation was signed into law to simplify the procedure of applying for forgiveness, along with conditions that aim to increase the number of bank loans by community banks, particularly for minority-owned businesses that were unable to obtain loans last year.

New Legislation Student Loan Forgiveness

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

Forgiveness terms for the initial draw of PPP loans

New Legislation Student Loan Forgiveness – First Draw PPP loans given to eligible borrowers qualify for complete loan forgiveness if they do so within the 8 to 24-week period after loan disbursement:

  • It’s the same for compensation and employees.
  • The proceeds of the loan can be used to pay the cost of payroll as well as other eligible expenses.
  • A minimum of 60% of the proceeds go to the cost of payroll

Second Draw PPP Loan forgiveness terms

Second Draw PPP loans to qualified customers are qualified for loan forgiveness when the loan is paid within an 8– to 24-week time frame.

  • The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
  • The loan proceeds could be used to pay expenses for payroll or other eligible expenses.
  • A minimum of 60% of the profits 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 the borrower is eligible to be forgiven. Borrowers can request forgiveness at any point up to the loan’s maturity date. If the borrower does not apply for forgiveness within 10 months after the end of the period covered and the loan is not renewed, PPP loans are no longer deferred, and borrowers must make monthly payments to their PPP lender.

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