On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. Section 22006 of the IRA provided $3.1 billion for USDA to provide relief for distressed borrowers with certain Farm Service Agency (FSA) direct and guaranteed loans and to expedite assistance for those whose agricultural operations are at financial risk.
USDA is implementing this provision with the goals of keeping borrowers farming, removing obstacles that currently prevent many borrowers from returning to their land, and improving the way that USDA approaches borrowing and loan servicing in the long-term. For many farmers, including those who have been hard hit by pandemic-induced market disruptions exacerbated by more frequent, more intense, climate-driven natural disasters, this assistance is vital if they are to continue producing the food, fiber, and fuel that are essential to the well-being of not only our rural communities but our Nation as a whole.
USDA has allocated up to $1.3 billion for initial steps to help distressed borrowers. This includes both automatic and case-by-case assistance. In total, between the IRA and pandemic assistance, about 35,000 distressed borrowers will benefit from assistance.
This program complements other assistance made possible through the IRA, including producers who experienced discrimination in USDA farm loan programs.
Extraordinary Measures Assistance
On May 19, 2023, USDA sent a letter to all FSA direct loan borrowers detailing a new opportunity to receive assistance if they took extraordinary measures to avoid delinquency between February 28, 2020 and October 18, 2022, such as taking on more debt, selling property, or cashing out retirement accounts. The letter provides the specific types of actions that may qualify for assistance and the documentation needed to receive assistance.
Borrowers can submit requests for extraordinary measure assistance in two ways:
- Send in a direct request using the farmers.gov 22006 assistance request portal at farmers.gov/ira22006request.
- Submit a request in person at a local FSA office.
All requests for assistance must be received by December 31, 2023. Assistance is subject to funding availability.
Additional Assistance for Distressed Borrowers
To build on the initial October 2022 assistance, FSA offered relief in April 2023 to more distressed borrowers farm loan borrowers. This included approximately $130 million in automatic financial assistance for qualifying direct loan borrowers based on the specific circumstances of their direct loans.
Qualifying borrowers received a letter detailing the assistance as payments were made. Eligibility for these new categories of automatic payments included:
- Assistance to direct loan borrowers who were past due on a qualifying direct loan as of September 30, 2022, but by fewer than 60 days, and remained delinquent on that loan as of March 27, 2023. The assistance will be equal to the amount of the delinquency and the next installment.
- Assistance to borrowers who restructured a qualifying direct loan on or after February 28, 2020 through primary loan servicing available through FSA. The assistance will be equal to the next installment, not to exceed the remaining balance.
- Assistance to borrowers whose interest owed on their qualifying direct loan debt exceeds the principal owed (on a loan-by-loan basis). The assistance will equal the pending interest as of March 27, 2023.
FSA has begun implementing a process that is focused on assisting borrowers unable to make their next scheduled installment. All borrowers should have recently received a letter detailing the process for seeking this type of assistance even before they become delinquent. Borrowers who are within two months of their next installment may seek a cashflow analysis from FSA using a recent balance sheet and operating plan to determine their eligibility.
On October 18, 2022, USDA provided nearly $800 million in assistance to distressed borrowers to help cure delinquencies and resolve uncollectable farm loan debts, including:
Nearly $600 million in payments to the accounts of approximately 11,000 borrowers who were 60 or more days delinquent on their FSA direct or guaranteed loan, as of September 30, 2022. For direct loan borrowers, the assistance includes payments to make their loans current and to cover their next annual installment. For guaranteed borrowers, these payments were equal to the amount the borrower was delinquent as reported in their most recent report from their lender and may require an accounting reconciliation.
Over $200 million in payments to resolve the remaining debts for approximately 2,100 borrowers who had their loan collateral liquidated but had remaining debt that was or was due to be referred to the Department of Treasury for offset or collections. This action will mean that these borrowers will no longer face garnishment of their tax refunds, Social Security benefits, or other Federal benefit payments.
Additionally, on October 18, 2022, USDA also began a process to provide approximately $66 million in payments from available pandemic assistance funds to provide similar levels of assistance to direct loan borrowers who used disaster set-aside as an option in response to the COVID-19 pandemic. Borrowers of over 5,000 direct loans who were struggling to make their scheduled direct loan payment during the pandemic and used a disaster set-aside to delay their payment to the final maturity date of their loan have automatically received a payment for the set-aside amount that remains outstanding. The majority of these payments have been processed and USDA anticipates completing all payments in April 2023.
USDA also will work with borrowers one-on-one to address complex cases as well as help producers with cashflow challenges.
First, FSA will work with about 1,600 farm loan borrowers with more complex cases, including borrowers facing bankruptcy and foreclosure. These borrowers have delinquencies of about $330 million and have the opportunity to receive assistance to cure delinquencies. These accounts will require manual, case-by-case review by the FSA. The aid provided in these cases may vary based on the necessities of the case and may include additional payments to resolve foreclosure fees. FSA contacted direct borrowers, or guaranteed borrower’s lenders, to validate payment amounts and these reviews are underway.
Second, FSA will use existing loan servicing procedures to identify whether an operation has sufficient cashflow to make the next loan installment payment (also known as financially distressed borrowers under existing FSA procedures). Through this procedure, qualifying borrowers can request FSA to cover the next installment. USDA estimates that up to 14,000 borrowers may qualify for estimated assistance of $175 million. FSA will directly notify direct loan borrowers of the process to initiate a review of sufficient cashflow that triggers potential assistance. These additional opportunities for financially distressed borrowers to receive a payment are anticipated to begin in 2023.
Direct loan borrowers who received Section 22006 assistance in 2022 will soon receive a set of revised tax documents along with a letter explaining the revised forms and notifying the borrower of options that may be available to avoid or alleviate any tax burden incurred as a result of receiving that financial assistance.
USDA cannot provide tax advice and encourages borrowers to consult their own tax professional, but FSA is providing educational materials for borrowers to be aware of the options.
Read frequently asked questions (en español) for direct loan borrowers who received Section 22006 assistance in 2022 or see our additional tax resources.
Improved Procedures and Forthcoming Regulations
FSA is finalizing changes to its policy handbooks to better align with existing statutory guidance on the actual needs of borrowers. These measures are anticipated to include:
- Updating FSA procedures to ensure both loan officers and borrowers have the opportunity to compare FSA’s terms with those offered by commercial banks.
- In cases where banks offer terms that don’t meet the borrowers’ actual needs, updating FSA procedures to ensure that they can access credit through FSA when otherwise eligible.
- Addressing FSA procedures to offer terms that assist borrowers in the accumulation of working capital reserves.
- Directing FSA staff to use their discretion to better benefit the borrowers they serve.
USDA continues to work on longer-term assistance and improving the way that USDA approaches borrowing and loan servicing. More information will be posted to this webpage as it becomes available.
For more information, contact FSA at your local USDA Service Center or through the FSA call center at 877-508-8364 between 8 a.m. and 7 p.m. Eastern. Additional information can be found here:
May 19, 2023: Letter to FSA distressed borrowers about Extraordinary Measures Assistance (en español)
May 1, 2023 News Release: USDA is Providing $130 Million in Assistance to Help Farmers Facing Financial Risk
March 27, 2023 News Release: USDA Announces Additional Assistance for Distressed Farmers Facing Financial Risk
Fact Sheet: IRA 22006 Additional Automatic Payments for Distressed Borrowers
February 16, 2023: Letter to FSA distressed borrowers detailing new direct installment assistance tool
October 18, 2022 News Release: USDA Provides Payments of nearly $800 Million in Assistance to Help Keep Farmers Farming
Frequently Asked Questions about Inflation Reduction Act Assistance for Distressed Borrowers
Fact Sheet: Inflation Reduction Act Assistance for Distressed Borrowers
Inflation Reduction Act Investments in FPAC Loan and Conservation Programs
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