Well into the growing season, many farmers who have lost both revenue and markets as a result of the ongoing pandemic continue to struggle with paying existing farm debt. While broader debt relief efforts are needed to address the unsustainable levels of farm debt that are saddling farmers all across the country, the U.S. Department of Agriculture (USDA) recently announced changes to federal farm loan programs that may provide immediate, short-term relief to some farmers.

USDA’s Farm Service Agency (FSA) will now allow farmers with existing FSA farm loans to essentially defer their payments for up to a year. However, there are a few important details and restrictions that farmers need to know about to see if they are eligible for this relief.

What is the disaster set-aside?

USDA has broad authority to defer farm loans and forgo drastic debt collection mechanisms, such as farm foreclosures and loan accelerations. The Disaster Set-Aside (DSA) Program is an example of how FSA has used this long-standing authority to give farmers additional flexibility in paying back federal loans, especially in times of crisis and stress.

Historically, the DSA program has been used to assist current FSA borrowers who are victims of a natural disaster (i.e. flood, drought, wildfire). However, in the wake of the ongoing coronavirus pandemic, USDA recently expanded this set-aside option to allow farmers who are affected by corona virus market disruption to be eligible to have their next annual payment on their direct FSA loan set aside, or deferred.

The DSA allows farmers to essentially skip an annual installment payment with a scheduled due date between March 1, 2020 and September 1, 2021 on any current direct FSA farm loan. The deferred payment is then moved to the end of their loan repayment period. Any principal set aside will continue to accrue interest until it is repaid.

Farmers can set aside up to the full amount of one year’s annual FSA loan installment. However, the actual amount of the set-aside will depend on what the farmer is able to pay FSA and what amount the farmer needs to cover expenses and debt payments to other creditors.

For more information on FSA’s Disaster Set-Aside, see USDA’s fact sheet or this guide produced by Farmer’s Legal Action Group. Note that neither document has yet been updated to reflect these recently announced changes.

Who’s eligible?

While historically disaster set-asides were only available to farmers in counties designated as disaster areas, now all FSA borrowers impacted by the COVID-19 pandemic are eligible for loan deferments. Eligible loans include FSA direct operating, ownership, emergency, or microloans.

In order to be eligible for the loan deferment, a farmer must:

• Demonstrate that they are unable to pay all family living and farm operating expenses, other debt obligations, and payments to FSA
• Not be more than 90 days past due on any FSA loan
• Have at least two years left on the term of the loan, except in the case of an annual operating loan which may also be eligible
• Be able to develop a positive cash-flow projection for the coming year

DSA is only available for current FSA borrowers, and does not apply to farmers who have loans with private banks and lenders (even if those loans are guaranteed by FSA).

How to apply

USDA will notify all current FSA direct loan borrowers by mail of their ability to utilize the expanded Disaster Set-Aside – including the possible set-aside of annual operating loans.

FSA will require the following information from farmers to determine DSA eligibility:

• Written request from the borrower to elect the set-aside
• Actual production, income, and expense records for the production and marketing period in which the disaster occurred
• Other items may be needed

Farmers must request the set-aside within 60 days prior to the payment due date, and no later than 90 days after the payment due date for the payment they wish to defer.

Farmers who are interested in applying for the loan deferral should call or email the farm loan staff at their local FSA county office, which remain open by phone appointments only.

To locate your local FSA county office, click here.