Student Loans Versus Paycheck Protection Program

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A reader attacked those who took out PPP (Paycheck Protection Program) loans, saying they were the equivalent of student loans.

Comparing the two loans is like saying baseball and football are the same sport because they both use a ball. Below is a summary, The Wall Street Journal, in an August 31 article (“Biden Attacks PPP Loan Recipients”), explains the difference in more detail.

This was a site common across the country as businesses were told they needed to shut down. 
(AP Photo/Nam Y. Huh)

PAYCHECK PROTECTION PROGRAM:

The Paycheck Protection Program (PPP) was part of the CARES Act of 2020 and ran from April 3 through August 8, providing $525 billion in government-guaranteed, forgivable loans (essentially grants) to businesses with 500 or few employees, which account for 47 percent of private-sector employment.

Recipients were required to spend 60 percent of their loan on payrolls. Many may remember that small businesses across the country were ordered by the government to shut down during the pandemic.

PPP money was for the payroll, keeping people in jobs and off unemployment. Those loans were forgiven provided most of the money went to payrolls.

There were some problems with PPP. The program relied on big banks as preferred lenders—which many small businesses did not have access.

There were high rates of fraud, with an estimated 15 percent of PPP loans going to fraudulent borrowers, which were overwhelmingly service by online financial technology or fintech firms.

Interestingly, according to a May 2022 Americans for Financial Reform [“Report: Lessons Learned from the Paycheck protection Program”] in California, 99 percent of franchised McDonalds locations received PPP funds. In the first 15 months of the pandemic McDonalds’ franchisees in California received at least $246.4 million in PPP Loans.

According to a September 2020 Brookings article [“Has the Paycheck protection Program Succeeded?”] “The program succeeded in its short-run goals, including helping smaller firms withstand sharp revenue declines during the [government] shutdown and keeping workers connected to their employers.”

But added, “Treasury’s muddled management of PPP’s implementation is noteworthy because of its failure to take seriously the advice it was given by a range of private-sector participants and policy experts, leading it to make mistakes that were both forecastable and forecasted.”

 

STUDENT LOANS:

The college cost of attendance for California’s Claremont McKenna for the 2022-23 year is approximately $82,127. But there is a climbing wall for students to explore.

Student loans means a person took out a loan voluntarily to attend school in exchange to repay it from a future income. According to the Association of Public and Land-Grant Universities, on an annual basis, median earnings for bachelor degree holders are $36,000 or 84 percent higher than those who have a high school degree.

College degree holders are half as likely to be unemployed as those with only a high school degree.

CTN’s editor volunteered in Palisades Charter High School college center for a few years, helping with essays.

One particularly brilliant woman had been accepted to all of the Ivy League Schools, but elected to go to Arizona University, where she had a full scholarship. Simply, her parents couldn’t afford the top tier schools, and she didn’t want the debt when she finished.

Another student was accepted into several top-ranked private universities but elected to go to Santa Monica College for two years. Once again, the student’s choice was a financial consideration.

This editor had no further contact with either student—it would have been interesting to see if they regretted the decision. I remember them specifically because so many other students either had parents who could afford the name college or planned to take out loans.

Biden’s proposed student loan forgiveness plan includes up to $20,000 in federal student loan forgiveness, an extension of the student loan payment pause and a proposal for a new income-driven repayment plan.

One is eligible for money back if you earn less than $125,000 annually (or $250,000 for household).

And if a person’s student loans are currently in default, the person still might qualify.

The August 31, WSJ (“Way More than $10,000 in Debt Forgiveness”) explains that another aspect of the program is allowing borrowers to repay their loans as a percentage of their income over a fixed period.  “The Penn-Wharton model suggests that this feature [income directed repayment] could cost as much as $450 billion over the next decade.”

Many readers may remember that this editor repaid a $5,000 loan that I needed for medical school. When I dropped out, I didn’t have the money necessary to repay the loan, so I waitressed.

In an August 2022 Forbes story [“Student Loan Forgiveness FAQs: The Details, Explained,”] reported that “Am I eligible if I never graduated or am still in school? Yes, if you never finished your degree or are still in school, you can still qualify as long as your loans were disbursed by June 30, 2022.”

Where do I apply?

 

 

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5 Responses to Student Loans Versus Paycheck Protection Program

  1. Joanna says:

    You likely don’t qualify to apply. Based on all that I have read, you must have outstanding federal student loans as of March 2020 (the date when federal student loan payments were suspended due to the pandemic). If you paid yours off before that date, you are out of luck.

  2. Perry Akins says:

    Often one reads that college graduates earn more over a lifetime than those without a college degree. I would like to suggest those who believe this tale ,which is certainly widely promulgated by “higher” institutions of learning, they look into the earnings stats of professions not requiring a college degree. Such non degree professions include airline pilots, electricians, elevator engineers, police officers, and highway patrolmen Compare those salaries with college graduates in communications, English, Russian language, history, art, government, etc. Dont be misled by falty stats published by the higher ed industry.

  3. andrew cohen says:

    My comment was specific to a couple of Republican congress people who didn’t have businesses they kept going and paid employees, but have attacked the Biden plan. It’s called hyopcriscy. BTW I think Biden knows the plan won’t go thru but will be able to tell the far left he tried.

  4. steve says:

    Perry, are you seriously going to cherry pick a half dozen different professions and degrees and then use that to discredit a statistic that is not only widely accepted but as inherently obvious as anything I can think of? It’s not “promulgated by higher institutions of learning.” It’s promulgated by facts. With that said, you do a fabulous job of highlighting why not everyone needs to attend college and how little thought some people put into their choice of degree and how they will pay back those loans they’re benefitting from.

  5. DJ McKenna says:

    Couple of things. I think it’s important, journalistically, to mention that the Wall Street Journal article with the misleading headline, was an opinion piece NOT a news article.

    Secondly, Biden did not in fact attack PPP recipients. Here’s what he actually said:

    “We’ve never apologized when the federal government forgave almost every single cent of over $700 billion in loans to hundreds of thousands of small businesses across the — across America during the pandemic. No one complained that those loans caused inflation. A lot of these folks and small businesses are working and middle-class families. They needed help. It was the right thing to do. So, the outrage over helping working people with student loans, I think, is just — simply wrong. We’re fixing the student loan program system itself. This too is really important.”

    Sounds to me like he was explaining his reasoning, not attacking, and sympathetic with PPP recipients as well as students overburdened with predatory loans.

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