The U.S. Department of Agriculture expects to make its first debt relief payments to socially disadvantaged farmers in early June, the agency said in a
The funds — part of the American Rescue Plan signed by President Biden in March — represent an effort to reverse generations of lending discrimation, particularly against Black, Hispanic, Asian and Native American farmers, many of whom have been hard hit by the COVID-19 pandemic. But the program has sparked concerns in the banking industry.
The first wave of debt forgiveness will be targeted at direct loans made by the USDA’s Farm Service Agency offices. Smaller agriculture banks could lose out on future interest income when USDA-backed loans that they wrote as private lenders are paid off early under future guidance that is due from the agency in 120 days.
“USDA is recommitting itself to gaining the trust and confidence of America’s farmers and ranchers using a new set of tools provided in the American Rescue Plan to increase opportunity, advance equity and address systemic discrimination in USDA programs,” Agriculture Secretary Tom Vilsack said in a press release Friday.
The American Bankers Association is providing recommendations to the USDA on how to implement the next phase of the program, a spokesperson said in an emailed statement Friday.
"We support USDA's efforts to provide debt relief to socially disadvantaged farmers and ranchers and welcome today's announcement that the department's direct loan borrowers will start to see this relief in June,” the spokesperson said.
The ABA spokesperson said that it is possible to ensure that borrowers get timely debt relief “while limiting unintended consequences for smaller, community bank lenders who make the vast majority of these loans.”
John Boyd, founder and president of the National Black Farmers Association, said that the USDA should not wait 120 days to send out relief to borrowers whose government-guaranteed loans are held by banks.
Planting season is in full swing, he said, and many farmers of color are facing foreclosure notices that call for their loan balances to be paid in 30 days or less. Boyd lost his own farm to foreclosure in the 1990s and has been advocating for loan forgiveness for 30 years. He said that the banking industry’s pushback on the debt relief program has been “hurtful.”
“This is something that should be done swiftly and quickly,” Boyd said. “Every time you put Black farmers and banks and the USDA in the same sentence, it ends up being a fiasco.”
The program will not only pay off certain debts owed by socially disadvantaged farmers; they will also receive direct payments equal to 20% of their outstanding debt. The Congressional Budget Office estimates that the program will cost roughly $4 billion through 2031.
