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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.

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.

We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.

$220,000 SBA 7A LOAN -DOT WAIVER OF ADMINISTRATIVE FEES & COSTS

$220,000 SBA 7A LOAN -DOT WAIVER OF ADMINISTRATIVE FEES & COSTS

Clients personally guaranteed an SBA 7(a) loan that was referred to the Department of Treasury for collection.  Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest.  We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.

$975,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

$975,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

Our firm successfully negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.

The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.

Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.

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