New rules make it easier for difficult borrowers to access PPP loans
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Struggling student loan borrowers who own a business got some welcome news this week: They will no longer be banned from the paycheck protection program.
Any business that owns 20% or more of a borrower who has previously defaulted on payments could be classified as ineligible for the government subsidized loans. The funds are aimed at keeping small businesses alive during the Covid pandemic turmoil and can be given out later.
As of March, an applicant should not be disqualified due to an insolvency or default on a student loan. The change is one of the reforms to the program announced this week by the Biden government, along with priority access for companies with 20 or fewer employees.
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The outstanding student loan debt in the US has dwarfed credit card and auto debt. More than 42 million Americans owed education loans. Around a third of borrowers are in arrears or arrears.
“Not only do borrowers benefit from this, but also their employees and society,” said university expert Mark Kantrowitz.
Before the pandemic, around 800,000 self-employed were in arrears with their student loans, according to a recent report by the Center for Responsible Lending. And around 500,000 people of color may have been excluded from PPP aid because they struggled to find borrowers for student loans.
Proponents praised the government’s decision to open the door for them to this funding round.
“Entrepreneurs who are already bearing the federal debt burdens should not face additional challenges to get the relief they need,” said Ashley Harrington, director of federal prosecution at the Center for Responsible Lending.
“Given the strong impact of the student debt crisis on people of color, the removal of the barrier to access to PPP facilities for those with defaults and arrears is particularly welcome,” she added.