Paying Off Your Student Loans With Forgiveness Programs

Paying Off Your Student Loans With Forgiveness Programs

The U.S. Small Business Administration issued a one-page application form that aims to simplify the process of applying for forgiveness of Paycheck Protection Program loans, as well as newly revised and updated forms to meet the requirements of the most recent stimulus legislation. 

Congress approved the COVID-19 relief plan last month that offered $284 billion in funding to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The law requires that the SBA issue simplified forms within 24 hours of the signing into law. This was done to facilitate the application for forgiveness. It also included conditions to encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans in the past.

Paying Off Your Student Loans With Forgiveness Programs

“The Small Business Administration met the requirements to release the one-page form for PPP loan forgiveness within 24 hours 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 released updated forms.”

Terms for forgiveness for the initial draw of PPP loans

Paying Off Your Student Loans With Forgiveness Programs – For eligible borrowers First Draw PPP loans are suitable to be forgiven. This happens when the loan payment is made within an 8 to 24 week period.

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

Second Draw PPP Terms of Loan Forgiveness

Second Draw PPP loans granted to borrowers who are eligible can be granted complete loan forgiveness, if within the 8to 24 week time period after loan payment:

  • The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exact same way.
  • The loan proceeds are used on payroll costs as well as other eligible expenses and
  • A minimum of 60% of the profits go towards payroll costs
  • How and when to apply for loan forgiveness

Once all of the loan funds have been utilized the borrower is eligible to be granted forgiveness. The borrower can apply for forgiveness at any time until the loan’s maturity date. If they do not file for forgiveness within 10 months after the date of expiration of the period covered, then PPP loan payments can no longer deferred, and borrowers will begin making payment to their PPP lender.

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