Troubled Student Loan Forgiveness Program Gets An Overhaul

Troubled Student Loan Forgiveness Program Gets An Overhaul

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

The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion in financing for small-scale businesses looking for forgivable loans to help them cope with the economic fallout of the coronavirus epidemic. It included a requirement for the SBA to issue streamlined forms within 24 hours of the legislation being adopted to make the process of applying for forgiveness, along with conditions that aim to increase the number of loans from community banks, particularly for minority-owned businesses that were unable to obtain loans in the past.

Troubled Student Loan Forgiveness Program Gets An Overhaul

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the obligation to issue the PPP form, which is one page long, for loan forgiveness within 24 days from the date of the enactment of the Consolidated Appropriations Act, 20,21. The article was posted on the Current Federal Tax Developments blog of Kaplan Financial Education. “The agency also released additional updated forms.”

Terms for forgiveness for the first draw of PPP loans

Troubled Student Loan Forgiveness Program Gets An Overhaul – First Draw PPP loans made to borrowers who meet the criteria are eligible for complete loan forgiveness if they do so during the 8- to 24-week period after loan disbursement:

  • The levels of compensation and employee pay are kept at a constant level.
  • The loan proceeds are used on payroll and other expenses that are eligible and
  • At least 60% of the proceeds are spent on payroll costs

Second Draw PPP Loan forgiveness terms

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

  • The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
  • The proceeds of the loan could be used to cover the cost of payroll as well as other expenses that are eligible.
  • Minimum 60% of funds go to payroll costs
  • When and how do I apply for loan forgiveness

Once all of the loan funds have been utilized, a borrower can apply to be forgiven. Borrowers are able to apply for forgiveness at any time prior until the date of maturity of the loan. If borrowers do not apply for forgiveness within 10 months of the date of expiration of the covered period 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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