Who Pays For Student Loan Forgiveness

Who Pays For Student Loan Forgiveness

The U.S. Small Business Administration has released a form of one page that makes it easier to apply for forgiveness of Paycheck Protection Program loans. The form is also updated with new forms to comply with the most recent stimulus law. 

Congress approved the COVID-19 relief package last month and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to reduce the economic burden of the coronavirus epidemic. It included a requirement for the SBA to issue simplified forms within 24 hours of the bill being approved by the lawmaker to streamline the application process for forgiveness. It also included conditions that aim to increase the number of loans from community banks, specifically for minority-owned businesses who were unable to obtain loans last year.

Who Pays For Student Loan Forgiveness

Ed Zollars, a partner with Thomas, Zollars & Lynch CPAs stated that the Small Business Administration fulfilled the requirement to publish the one-page PPP form loan forgiveness within 24 hours of the date of enactment in 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 new forms that were updated.”

Forgiveness terms for the initial draw of PPP loans

Who Pays For Student Loan Forgiveness – First Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness during the 8- to 24-week period after loan disbursement:

  • It’s the same for pay and benefits for employees.
  • The proceeds of the loan can be used to pay payroll costs or other eligible expenses.
  • A minimum of 60% of profits are used for the cost of payroll

Second Draw PPP Conditions for 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 8to 24-week duration following loan disbursement:

  • The First Draw PPP loan requires that the compensation and employee levels be maintained in the exactly the same manner.
  • The loan funds are used on payroll costs and other eligible expenses; and
  • Minimum 60% of profits go towards the cost of payroll
  • How to request loan forgiveness and when

A borrower can apply for forgiveness after the loan’s proceeds for which the borrower has applied for forgiveness have been used. The borrower can request 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 end date of the loan are able to receive the loan payment from their PPP lender.

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