How much does forgiveness cost? $7 million for a Christian college.
(RNS) — A dispute with the federal government over the worker count, coupled with bad timing, could cost a small evangelical Christian congregation college more than 7 million dollars.
Gordon College, founded in 1889 north of Boston, is suing the Small Business Administration after the agency denied a request for forgiveness of a loan granted under the Payroll Protection Plan, which was aimed at preserving jobs during pandemic-related closures. While millions of PPP loans Although their debts were forgiven, some employers, such as Gordon, violated SBA rules and ended up with debts they did not expect to repay.
“We had every reason to believe that the debt forgiveness portion of the program would be fulfilled if necessary,” school officials said in a statement to RNS.
Gordon’s lawsuit reveals some of the confusion that surrounded the PPP program. The program was hastily passed in the early days of the pandemic in 2020 and began distributing funds before the rules governing those loans were finalized. More than 11.5 million loans totaling about $793 billion were made under the program.
According to documents filed in a federal court lawsuit, Gordon applied for a PPP loan in mid-April 2020. Under program rules at the time, Gordon claims, the loan would be forgiven if the school continued to pay its employees during the term of the loan and did not lay them off. But there was a catch: The loan program limited its benefits to organizations with fewer than 500 employees.
Gordon employed over 500 people at the time, but that number included student assistants and part-time employees. After consulting with legal counsel, Gordon decided to count employees using the “full-time equivalent” (FTE) model commonly used in academic institutions and submitted a loan application.
According to this model, Gordon employed 495.67 people.
The school’s loan application, submitted on April 15, 2020, was approved a few days later, according to court documents, and the school had the funds on April 23.
Three days later, the SBA explained how to determine the number of employees and asked them to determine the number of employees using the headcount method.
“For example, if a borrower has 200 full-time employees and 50 part-time employees, each working 10 hours per week, the borrower has a total of 250 employees,” the SBA said.
When Gordon applied for forgiveness of his loan in 2022, the SBA denied it, citing these new guidelines. Gordon countered by saying that the staff rule was published after the loan was approved and should not apply. “The SBA has determined that the borrower is ineligible for the PPP loan,” the SBA said in a letter dated April 12, 2022.
Gordon said in his statement that “the entire amount was spent on employee payroll costs in order to keep faculty and staff employed and avoid extensive short-term furloughs or layoffs.”