Christopher Walljasper and Leah Douglas

WASHINGTON/CHICAGO (Reuters) – The latest version of the Biden administration’s plan to forgive billions of dollars in farm debt – initially targeted at farmers of color – will exclude thousands of its originally intended recipients because of a change in loan eligibility, according to government data reviewed by Reuters.

The debt relief program had been cast by President Joe Biden’s administration as a form of restitution for decades of discriminatory lending practices by the U.S. Department of Agriculture (USDA) against Black and other minority farmers.

Advocates for farmers claim that changing the program could undermine the trust already existing between government officials and agricultural minorities.

“If Black farmers don’t get this debt relief that they’ve been promised, it’s almost like a contract that’s being broken,” said Cornelius Blanding, executive director of the Federation of Southern Cooperatives, which represents Black farmers.

In April, the American Rescue Plan Act (ARPA), was used to first try to forgo $4 billion of debt for black farmers.

According to USDA’s Farm Service Agency data (FSA), Reuters obtained the USDA data through a Freedom of Information request. The USDA wrote to 14120 farmers of color in May and September promising $2.4 million debt relief.

The program was blocked by white farmers who claimed that its racial characteristics made it inconstitutional.

New program included in Build Back Better Bill (BBBA) is being negotiated by the Senate. This would give farmers debt relief based upon their economic security rather than race.

However, it will only be used to relieve farmer debt if they have direct loans from FSA. It does not apply to farmers with private loans that are guaranteed by FSA.

This means that 15% or 2100 of the 14120 farmers of color who were sent letters by USDA this spring wouldn’t meet the criteria, as they have direct loans but are guaranteed.

A staffer from the Senate Agriculture Committee said that direct loans are given preference to farmers because these farmers tend to have higher economic distress than the guaranteed borrowers.

A congressional staffer who was familiar with policy details but asked to remain anonymous said that in addition to changing eligibility, some farmers could be left out by the use economic metrics.

“I don’t think there’s any potential formula that’s going to capture 100% of the socially disadvantaged farmers who would have gotten the debt relief before.”

USDA refused to disclose details about the program because it fell under Congress’ purview, however, they acknowledged that the government had a difficult relationship with minority farmers.

“Let’s be clear: we have a lot of work to do to rebuild trust. Dewayne G. Goldmon, USDA Senior Advisor on Racial Equity, said that while the American Rescue Plan was a good opportunity, some of its key provisions were rescinded by court orders.

‘PAY OFF YOUR DEBT … GET ANOTHER LOAN’

Luke Meeks is 39 years old and a Lakota Native American rancher. Like his father, he also runs a ranch in South Dakota’s southwest. He was one of the ARPA-compliant farmers who were promised debt relief by USDA.

Forgiveness of his $500,000 in FSA debt would be a game-changer for Meeks, who has been trying to move his family to a better location for his children’s education, but cannot get bank approval.

“It would simplify everything,” he said.

Some of his loans, however, are guaranteed so they wouldn’t be eligible to receive relief from the BBBA. Meeks claimed that his options without the relief from debt are very limited.

“You just kind of get by,” he said. “Take out a big loan, sell your calves, pay off your debt, then you get another loan.”

Farmers who cannot qualify for traditional loans may be granted guaranteed loans by banks. FSA data shows that such loans can offer three times the amount of direct loans. They are also backed by up to 95% FSA.

John Boyd Jr., a Virginia farmer president of the National Black Farmers Association (NBFA), expressed concerns that the new debt-relief plan would disappoint Black farmers.

“Every time we’re thrown in the pot with everybody else, we don’t get the money,” he said.

The Department of Justice still defends the ARPA Debt Program in Court. Jessica Culpepper is a Senior Associate with Public Justice and represents NBFA, as well the Association of American Indian Farmers, in this litigation.

She said that the U.S. District Court for the Northern District of Texas judge will likely follow a May Sixth Circuit Court of Appeals ruling that declared another ARPA program, which sought relief by race, unconstitutional.

Many farmers of color allege that FSA officers discriminate against them in accessing loans.

USDA has previously settled discrimination suits with farmers who were Black, Hispanic or Native American, but minority farmers claim that the settlements are inadequate.

According to the U.S. Government Accountability Office, minority farmers receive an inordinately low share of credit in farm loans in 2019, 2021 and 2019.

BANK LOBBYING

After much lobbying from the banking sector, the decision to exclude guaranteed loans was made.

In early April, the American Bankers Association (ABA), Independent Community Bankers (NASDAQ:) of America (ICBA), and National Rural Lenders Association warned USDA in a letter of “adverse consequences” to bank incomes if guaranteed loan portfolios were suddenly paid off.

The letter stated that these consequences might include lost interest revenue on loans and loss of premiums on loans trading in secondary markets.

According to a USDA official, guarantee borrowers will still be eligible for loan modifications of $1.02 trillion under the current BBBA plan. This could include reamortization and lowering interest rates.

Zach Ducheneaux, FSA administrator, called for banks to give farmers with guaranteed loans of color more flexibility at the ABA Agricultural Bankers conference in November. He said that they wouldn’t receive relief as expected.

“We are going to have borrowers in your portfolios making plans based on that letter,” he said to the audience of bankers, his face flushed and clearly angry. “It’s got my damn signature on it.”

According to FSA data, 68% had replied to USDA confirming that their debt was correct by September end. A USDA official said that the agency still accepts responses from eligible farmers for the ARPA program.