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SBA Has Stopped Auto-Enrollment In The Hardship Accommodation Plan for COVID EIDL Loans

SBA COVID EIDL Loan Default? Learn about HAP, OIC, Workout or Bankruptcy

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SBA Has Stopped Auto-Enrollment In The Hardship Accommodation Plan for COVID EIDL Loans

As of March 19,2025, the Small Business Administration (SBA) discontinued its automatic enrollment option for the Hardship Accommodation Plan (HAP) affecting COVID EIDL loans. This sudden change applies both to borrowers with disbursements below $200,000—who had previously been able to self-enroll—and those seeking new or renewed hardship status on larger loans. Many businesses relied on the HAP to temporarily lower their monthly payments, but they will now face a more demanding repayment environment.

Key Developments

1. Termination of Automatic HAP Enrollment

     
  • The one-click enrollment feature contained in the My SBA Loan Portal that allowed COVID-EIDL borrowers with disbursement amounts of $200,000 or less to reduce their monthly payments to as little as 10% of the regular amount up to 2 and ½ years (30 months) is no longer available.
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  • Borrowers with existing hardship accommodation can continue their reduced payments until their current term expires, but automatic renewal is not an option unless future policies reverse the ban.

2. Shift in Policy under a New Administration

     
  • The new administration, led by Trump-appointed SBA Administrator Kelly Loeffler, has adopted stricter approaches to debt repayment for the SBA COVID EIDL loan portfolio.
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  • Rather than continuing to “kick the can down the road” with repeated short-term reductions, the SBA appears focused on distinguishing which borrowers can realistically repay and which are likely to default.

3. Possible Outcomes for Borrowers

     
  • Higher Payments: Borrowers could see monthly payments rise sooner, leading many to reassess their budgets, seek alternative financing or default.
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  • Accrued Interest: Delaying full payments can mean more interest piling up, ultimately increasing the total amount owed, including the likelihood of default.
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  • Program Uncertainty: If EIDL loan servicing is sold to third party debt buyers, those private entities may be even less flexible in granting payment relief.

4. Potential Next Steps & Strategies

     
  • More Flexible Offers in Compromise (OIC): The SBA may begin considering more serious settlement discussions for borrowers and guarantors whose businesses have permanently closed or cannot sustain full repayments.
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  • Aggressive Collection Actions: Borrowers who default—especially those with large loans or pledged real  estate—could face referral to the U.S. Treasury or litigation.
  • Allowing Defaults: The agency may simply let defaults take their course without offering continued hardship extensions, especially where repayment is deemed unfeasible.

5. Stay Informed

     
  • Official details about how the SBA will handle future defaults, settlement requests, or enforcement measures  remain limited.
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  • Borrowers should closely follow new SBA announcements and assess their repayment strategies. In the near term, businesses may wish to explore all financing options, consult with legal professionals, and be prepared for aggressive collection activity.

Source: https://www.sba.gov/funding-programs/loans/covid-19-relief-options/covid-19-economic-injury-disaster-loan/manage-your-eidl#options-for-borrowers-facing-financial-hardship

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

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Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure

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Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements

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Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.

$505,000 SBA 7A LOAN - FEDERAL DISTRICT COURT LITIGATION (CALIFORNIA)

$505,000 SBA 7A LOAN - FEDERAL DISTRICT COURT LITIGATION (CALIFORNIA)

Clients borrowed and personally guaranteed an SBA 7(a) loan.  Clients defaulted on the SBA loan and were sued in federal district court for breach of contract.  The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan.  We were subsequently hired to intervene and aggressively defend the lawsuit.  After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.

$150,000 SBA 7A LOAN - NEGOTIATED STRUCTURED WORKOUT AGREEMENT

$150,000 SBA 7A LOAN - NEGOTIATED STRUCTURED WORKOUT AGREEMENT

Client personally guaranteed SBA 7(a) loan for $150,000. COVID-19 caused the business to fail, and the loan went into default with a balance of $133,000. Client initially hired a non-attorney consultant to negotiate an OIC. The SBA summarily rejected the ineligible OIC and the debt was referred to Treasury’s ureau of Fiscal Service for enforced collection in the debt amount of $195,000. We were hired to intervene and initiated discovery for SBA and Fiscal Service records. We were able to recall the case from Fiscal Service back to the SBA. We then negotiated a structured workout with favorable terms that saves the client approximately $198,000 over the agreed-upon workout term by waiving contractual and statutory administrative fees, collection costs, penalties, and interest.

$383,000 SBA 7A LOAN - NEGOTIATED RELEASE OF LIEN FOR CONSIDERATION

$383,000 SBA 7A LOAN - NEGOTIATED RELEASE OF LIEN FOR CONSIDERATION

Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate  and collect all pledged collateral pursuant to the trust deed instruments.

The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery  to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.

After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.

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