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Vilsack explains debt relief under Inflation Reduction Act

Secretary of Ag Tom Vilsack

Secretary of Ag Tom Vilsack

Farmers who are behind in paying back USDA farm loans may qualify for some loan forgiveness under the Inflation Reduction Act.

“Through no fault of their own, our nation’s farmers and ranchers have faced incredibly tough circumstances over the last few years,” said Ag Secretary Tom Vilsack. “The funding included in the (Oct. 18, 2022) announcement helps keep our farmers farming and provides a fresh start for producers in challenging positions.”

USDA announced $3.1 billion in assistance for distressed farm loan borrowers through Section 22006 of the Inflation Reduction Act.

These funds include $800 million for 11,000 delinquent direct and guaranteed borrowers that had their accounts brought current. USDA also paid the next scheduled annual installment for these direct loan borrowers.

Another 2,100 borrowers, with their farms foreclosed on but still had remaining debt, will have this debt resolved to cease debt collections and garnishment.

Additional funds can support up to 7,000 direct loan borrowers who used the Farm Service Agency’s disaster-set-aside option during the pandemic to move their scheduled payments to the end of their loans.

There are also two new case-by-case processes to provide more assistance with delinquencies from 1,600 complex cases.

One of these case-by-case processes will strive to intervene quickly when borrowers request assistance. This process is expected to help about 14,000 financially-distressed borrowers who are not delinquent. These are farmers who may be confronted with a cashflow shortage due to barge issues, the drought, and other situations beyond their control that may affect and impact their access to cash.

Vilsack pointed out that the farmers who borrow from USDA financing are generally those who can’t get credit anywhere else.

All told, USDA provides credit to about 115,000 producers who cannot obtain enough commercial credit through direct and guaranteed farm loans. This doesn’t include farm storage facility loans or marketing assistance loans.

Speaking at a press conference following the announcement of the funds, he added that the Farm Service Agency has very good loan officers that understand farmers. The loan officers know the warning signs that a farmer can’t make their payments. They also strive to build relationships with farms of all types and recognize how difficult it can be to farm – or to make a living farming.

These loan officers may be asked to build greater trust with farmers so they can see more quickly that someone is having difficulty making ends meet. Ultimately, USDA wants loan servicing improved to provide borrowers with flexibility and ways to address the risks associated with farming.

Having received his Juris Doctor degree in 1975, Vilsack worked as a lawyer representing farmers during the 1980s. Many of these farmers learned their banks had failed, and the farms were foreclosed upon. Unable to pay off the loans, farmers were forced into bankruptcy.

Vilsack described this experience in the 1980s as “very difficult.”

While the newest funding will not save every farm, it could give farmers a fresh start, and an opportunity for success, he suggested.

The Secretary of Agriculture added that work must continue to develop new streams of revenue in farming. He said he felt optimistic talking about investment in conservation, carbon sequestration, energy, organic farming, and conversion of ag waste into revenue streams.

In addition, USDA has developed the Equity Commission to help government be accessible and working for all people. This commission is developing recommendations to assure the USDA is carrying out its core values of respect, dignity, equity, inclusion, trust and integrity.

For more information, visit farmers.gov/inflation-reduction-investments, or call your local Farm Service Agency center.

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