Student Loan Forgiveness Update

The U.S. Small Business Administration released a one-page form aimed at simplifying the process of applying for forgiveness of Paycheck Protection Program loans, together with updated and revised forms that conform to the requirements of the most recent stimulus legislation. 

Congress approved the COVID-19 relief plan last month, which included $284 billion of financing for small-scale businesses who needed loans. The money was intended to reduce the economic burden of the coronavirus pandemic. The law required that the SBA release simplified forms within the first 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions to encourage banks in the community to lend more specifically to minority-owned companies who were unable to obtain loans last year.

Student Loan Forgiveness Update

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to issue the PPP form, which is one page long, for loan forgiveness within 24 hours of 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 updated forms.”

Forgiveness terms for the first draw of PPP loans

Student Loan Forgiveness Update – For borrowers who are eligible, First Draw PPP loans can be qualified to be forgiven. This is if the loan disbursement occurs within an 8 to 24-week period.

  • The same goes for the pay and benefits for employees.
  • The proceeds from the loan may be used to pay for expenses for payroll or other eligible expenses.
  • A minimum of 60% of the funds go to payroll costs

Second Draw PPP Conditions for loan forgiveness

Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if during the 8– to 24-week time period after loan payment:

  • The First Draw PPP loan requires that the employee and compensation levels are maintained in the exact same way.
  • The loan proceeds can be used to pay for expenses for payroll or other expenses that are eligible.
  • Minimum 60% of funds go to expenses for payroll
  • How and when to apply for loan forgiveness

A borrower may apply for forgiveness only after all loan proceeds for which the borrower wants forgiveness have been used. Borrowers can apply for forgiveness at any time prior to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 years of the end of the time period that was covered and the loan is not renewed, PPP loans are not deferred any longer, and the borrower will be required to make payment to their PPP lender.

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