What Is Loan Forgiveness For Student Loans

What Is Loan Forgiveness For Student Loans

The U.S. Small Business Administration has released a form of one page which makes it simpler to request forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus legislation. 

Congress approved the COVID-19 relief plan last month, which provided $284 billion of funding to small businesses in need of loans. The funds were used to reduce the economic burden of the coronavirus pandemic. The package also mandated the SBA to issue simplified forms within 24 days of the bill being signed into law to simplify the procedure of applying for forgiveness, along with conditions meant to encourage more bank loans by community banks, particularly for minority-owned companies that were unable to obtain loans last year.

What Is Loan Forgiveness For Student Loans

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs, stated that the Small Business Administration fulfilled the obligation to issue the one-page form for PPP loan forgiveness within 24 hours from 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 published more updated forms.”

Forgiveness terms for the initial draw of PPP loans

What Is Loan Forgiveness For Student Loans – First Draw PPP loans made to borrowers who meet the criteria are eligible for full loan forgiveness if within the 8-to 24-week period after loan disbursement:

  • The same goes for the pay and benefits for employees.
  • The loan proceeds are spent on payroll and other expenses that are eligible and
  • At least 60% of the profits are used for the cost of payroll

Second Draw PPP Terms of Loan Forgiveness

Second Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness if they do so during the 8– to 24-week duration following loan disbursement:

  • The First Draw PPP loan requires that the compensation and employee levels be maintained in an identical manner.
  • The loan funds are used on payroll costs and other eligible expenses; and
  • At least 60% of funds go to payroll costs
  • How and when to apply for loan forgiveness

A borrower can apply for forgiveness after the loan’s proceeds for which the borrower is requesting forgiveness have been used. The borrower can apply for forgiveness at any time up to the date of maturity. If the borrower does not apply for forgiveness within 10 months after the last day of the covered period and the loan is not renewed, PPP loans are not deferred any longer, and borrowers will begin making payment to their PPP lender.

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