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UPDATE:
What's New?
The USDA has started sending letters to direct loan borrowers who qualify for loan payoffs.
What Do You Need To Do?
Triple check that the amount of the loan debt provided in the letter is correct. Remember, it's the amount of the loan as of January 1, 2021.
If the amount in the letter is correct, sign and return the letter as instructed in the letter. If you believe the amount indicated in the letter is incorrect, state that on the letter and follow the instructions provided in the letter to return the letter.
What Will the Payments Cover?
The USDA's Farm Service Agency (FSA) published the first notice of funding available (NOFA) for loan payments for eligible borrowers with qualifying direct farm loans under the Farm Loan Programs (FLP) and Farm Storage Facility Loan Program (FSFL). According to the NOFA, as directed by Congress in the American Rescue Plan Act of 2021, the U.S. Treasury will pay 100 percent of the outstanding balances to clear the debt, and farmers will receive an additional 20 percent to cover tax liabilities, fees and other loan costs. USDA has also said that it will cover the prepayment penalty for guaranteed loans once they start implementing payments for those loans.
How Will the USDA Make the Payments?
The outstanding loan amount will be paid directly to the loan provider (FSA), and checks for the 20 percent will be sent to the borrowers.
Note that another NOFA will be issued at a later date concerning qualifying guaranteed loans and direct loans that no longer have collateral and have been previously referred to the Department of Treasury for debt collection for offset.
Where Can I Find More Info.?
More information is provided below, and you can visit American Rescue Plan Debt Payments | Farmers.gov and In Historic Move, USDA to Begin Loan Payments to Socially Disadvantaged Borrowers under American Rescue Plan Act Section 1005.
Original Post
This month brought historic federal legislation aimed at addressing systemic discrimination and assisting black farmers and farmers of color throughout the United States. The American Rescue Plan Act of 2021 (the Act) was signed into law earlier this month by President Biden. In it, Congress provides debt relief to socially disadvantaged producers including Black/African American, American Indian or Alaskan native, Hispanic or Latino, and Asian American or Pacific Islander. It also provides grants, training, education and other forms of assistance aimed at helping minority farmers, ranchers, and forest land owners and operators acquire or secure land. Keep reading to find out more.
The Act provides $3.7 billion to provide payment of up to 120% of the outstanding debt of “each socially disadvantaged farmer or rancher” who had a direct or guaranteed loan or a Farm Storage Facility loan as of January 1, 2021. Loan payments received from borrowers after January 1, 2021 will not reduce the amount of the American Rescue Plan debt payment from FSA. The debt relief payment will be calculated based on the amount you owed on January 1, 2021. The payments, which are to be made “to pay off the loan directly or [made] to the socially disadvantaged farmer or rancher (or a combination of both),” include money to pay any taxes that might be owed when the loans are retired.
The Act also includes $1.1 billion to fund support programs for minority farmers, ranchers, and forest land owners and operators, including technical assistance, education, extension and financial assistance. At least five percent of the funds must be used to provide grants and loans to improve access to land and to address heirs’ property issues. In addition, at least 5 percent of the funds also must be used to provide financial assistance to socially disadvantaged farmers, ranchers, or forest landowners who were farm loan borrowers in the past and who suffered adverse actions or past discrimination or bias in USDA programs. The funds will also be used to establish a commission to address racial equity issues at USDA and to provide financial support for research and education at historically Black colleges and land grant universities, Tribal colleges and universities, Native Alaskan- and Hawaiian Native-serving institutions, and Hispanic-serving institutions.
The USDA is drafting the rules and regulations to implement the Act, including how to handle any pre-payment penalties that might pop up when the loans are paid off. More guidance will be coming from the agency. But, here’s what we know so far:
Who Qualifies for the Debt Relief?
The debt relief is for (1) any socially disadvantaged person who (2) has a direct or guaranteed farm loan or a Farm Storage Facility Loan as of January 1, 2021.
Eligible loans include:
Direct loans by FSA, including Farm Storage Facility Loans, Direct Farm Ownership Loans, Farm Operating Loans (this includes Microloans and Youth Loans), Emergency Loans, Conservation Loans, and Soil and Water Loans; and
Guaranteed loans by FSA and made by an approved lender, including Farm Ownership Loans, Farm Operating Loans, and Conservation Loans.
Ineligible loans include:
Rural Development loans, FSA Marketing Assistance Loans and debts associated with other USDA programs or other non-USDA federal debts; and
Loans from commercial lenders like banks, credit unions or Farm Credit institutions if they don't include an FSA guarantee.
“Socially disadvantaged” is defined as any person who is Black/African American, American Indian or Alaskan native, Hispanic or Latino, and Asian American or Pacific Islander. There are no other requirements. It does not matter how much you owe or whether you’re behind in your payments. Even debts that have been referred for offset or to collections are eligible. What matters is that you qualify under the definition of "socially disadvantaged" and that you owed on an eligible loan as of January 1, 2021.
How Will USDA Know Who Qualifies for the Debt Relief?
Producers who have a direct or guaranteed farm loan or a Farm Storage Facility Loan will likely have worked with USDA’s Farm Service Agency in the past and the agency will have their ethnicity and race on file. A borrower, including those with guaranteed loans, can contact their local their local USDA Service Center to verify, update or submit a new ethnicity and race designation using the AD-2047 form. You can find your nearest service center at farmers.gov/service-locator.
Find More Information
You can read the USDA’s announcement about the Act here. The USDA also has an American Rescue Plan Debt Payment FAQ webpage, which is where the agency shares the most up-to-date information. Be sure to check that webpage for more information, including what to do if you have loan payments coming due and how the USDA is collaborating with community-based organizations and universities on outreach, technical assistance, and providing borrowers with access to financial, legal, and tax-planning services.
And, keep watching this blog for updates and more information, and to learn when and how you can make comments on the rules USDA proposes, as well as when you’ll be able to apply for the programs.