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.
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 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?