In response to the economic crisis caused by the COVID-19 pandemic, Congress passed a stimulus relief bill known as the
American Rescue Plan Act of 2021 (“ARPA”). The ARPA is a $1.9 trillion coronavirus stimulus relief bill, $10.4 billion of which is allocated to the USDA. The agricultural provisions of the stimulus package contain specific instructions on how the USDA is to spend the relief funds. Accordingly, under those provisions, $4 billion given to the USDA will be used to provide debt relief for minority or socially disadvantaged farmers and ranchers.
According to the USDA, the $4 billion ARPA funding allows the agency to “increase opportunity, advance equity and address systemic discrimination in USDA programs.” Under Section 1005 of the ARPA, Congress instructs the USDA to provide direct payments in an amount up to 120% of a socially disadvantaged farmer’s or rancher’s outstanding debt as of January 1, 2021. Of the 120% direct payment, 100% pays off a minority producer’s loan balances. The additional 20% is offered to pay the taxes and fees associated with receiving the direct loan forgiveness payment.
The ARPA specifies that the $4 billion allocation is to forgive minority or socially disadvantaged producers’ loans. The ARPA uses
Section 2501(a) of the Food, Agriculture, Conservation, and Trade Act of 1990 to define “socially disadvantaged” farmers and ranchers, which is someone “who is a member of a socially disadvantaged group,” which is further defined as “a group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities.” Thus,
according to the USDA, farmers and ranchers eligible to receive loan forgiveness include, but are not limited to: Black/African-American, Hispanic/Latino, American Indian, Alaskan Native, Asian-American, and Pacific Islander. Under the current regulations, women are not included in this definition unless they are a member of one of the eligible groups.
In general, §1005 of the ARPA provides loan forgiveness for certain direct and guaranteed USDA loans.
Direct loans are loans made directly from the USDA’s Farm Service Agency (“FSA”) to a farmer or rancher. The direct loans eligible for loan forgiveness include Conservation, Emergency, Farm Ownership, Grazing, Irrigation and Drainage, Operating, and Soil and Water, and Farm Storage Facility Loans.
Guaranteed loans, on the other hand, are made by a private USDA-approved lender with the backing of the FSA. The guaranteed loans eligible under ARPA include Farm Ownership, Farm Operating, and Conservation loans. Importantly, both delinquent and current loans are eligible for debt relief under the ARPA.
While the USDA anticipates to forgive direct and guaranteed loans, the agency has decided to forgive direct loans first. On May 21, 2021, the FSA issued a
notice of funding availability (“NOFA”) which contains guidance on eligibility requirements and procedures the agency will use to distribute loan forgiveness payments. The NOFA announced that the FSA will begin sending payment offer letters to socially disadvantaged producers with eligible direct loans. Additionally, the NOFA explains that the FSA will publish a separate NOFA in 120 days that addresses debt relief for guaranteed loans.
To participate in this debt relief program, eligible direct loan borrowers must return the payment offer letter they receive from the FSA. Currently, the FSA is sending letters to socially disadvantaged producers which offers a debt payoff for their direct loans. If a producer would like to participate in the debt relief program—after reviewing the letter—they must sign and return the letter to FSA. The FSA estimates it will take three weeks to process debt relief payments once the agency receives a producer’s signed letter.
While the USDA expected to start issuing debt relief payments for direct loans in early July, a group of farmers filed a lawsuit to prevent the USDA from distributing these payments.