When Do Student Loans Get Forgiven

When Do Student Loans Get Forgiven

The U.S. Small Business Administration released a one-page form designed to make it easier for applicants to complete the process of applying to forgive Paycheck Protection Program loans, together with revised and updated forms to meet the requirements of the most recent stimulus legislation. 

The COVID-19 aid package Congress adopted last month revived the PPP with $284 billion of funds for small businesses that want forgivable loans to help them cope with the economic fallout from the coronavirus outbreak. The law required that the SBA release simplified forms within 24 hours of the legislation’s signing into law. This was done to simplify the process of applying for forgiveness. The legislation also contained conditions to encourage community banks to make more loans particularly to minority-owned businesses who were unable to obtain loans in the past.

When Do Student Loans Get Forgiven

“The Small Business Administration met the requirements to release the single-page form for the forgiveness of PPP loans within 24 days of the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also released more updated forms.”

Terms for forgiveness for the first draw of PPP loans

When Do Student Loans Get Forgiven – First Draw PPP loans made to borrowers who meet the criteria are eligible for total loan forgiveness within the 8-to 24 week period that follows loan disbursement:

  • The levels of compensation and employee pay are ensured
  • The proceeds from the loan may be used to cover expenses for payroll or other eligible expenses.
  • Minimum 60% of funds go to expenses for payroll

Second Draw PPP Loan Forgiveness The terms

Second Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8to 24-week covered period following loan payment:

  • The First Draw PPP loan requires that the employee and the compensation levels be maintained in an exactly the same manner.
  • The loan funds could be used to pay for the cost of payroll as well as other eligible expenses.
  • At least 60% of the profits are used for the cost of payroll
  • How do I apply for loan forgiveness and when

Once all of the loan funds have been utilized the borrower is eligible for forgiveness. Borrowers are able to apply for forgiveness any time up until the date of maturity of the loan. Borrowers who do not request forgiveness within 10 month of the expiration date of the loan are eligible to receive the loan payment from their PPP lender.

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