An Urban's Rural View

Are 49-Year-Olds Still Paying Off Student Loans?

Urban C Lehner
By  Urban C Lehner , Editor Emeritus
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In my continuing research on beginning farmers (http://tiny.cc/…), I stumbled on a report with a title most farmers will love: "Farming Is Public Service!" Whether they will like the report itself (http://tiny.cc/…) is less clear. Issued by the National Young Farmers Coalition, it makes the case for forgiving student loans as a way of encouraging young people to take up farming.

Specifically, the report advocates including farmers in the federal Public Service Loan Forgiveness Program, under which people entering "public service" professions make income-based student-loan payments for 10 years and then have the balance of their federal-loan debt forgiven. The professions that currently qualify -- nurses, teachers and the like -- are mainly in the not-for-profit economy.

Last June, a Republican Congressman from New York, Chris Gibson, and a Democratic Congressman from Connecticut, Joe Courtney, introduced a bill to add farmers to the list. Salute Gibson and Courtney for an interesting idea and good intentions. Farming is unquestionably a public service and student-loan obligations probably do make it difficult for young farmer wannabes to borrow what they need to go into business.

There are problems, however, with this well-intentioned measure. For one thing, it potentially opens a loophole big enough to drive a 32-row combine through. If for-profit workers who grow food qualify, why not carpenters, who build shelter for us, or textile workers, who make clothing, or any of a number of other trades with a claim to providing a public service?

Even farmers might wonder whether, of all the ways taxpayer dollars might be used to help beginning farmers, this is the most productive use. Might it not, for example, be better to deploy the same number of dollars, however many that is (I have not been able to find a cost estimate for the bill), to offer more generous land-loan terms for beginning farmers?

Farmers might also wonder whether the legislation would lower the barriers to entry into agriculture too far, encouraging people with no real chance of succeeding at farming to take it up. Congressmen Gibson and Courtney foresaw that problem. Their bill specifies that that to qualify, the applicant must work full time at farming and make at least $35,000 a year at it (http://tiny.cc/…).

This provision will surely weed out the unserious, but it may also disqualify those who have a real chance of making it. A great many farmers, beginning and otherwise, have off-farm jobs. They could not get through the hard years -- and the early years can be very hard, but then so can the later ones -- farming full time. The outside income doesn't mean they're hobbyists; it means they're willing to do what it takes to survive.

Andy Kelly is an example. In 2010, with the help of a Farm Services Administration beginning-farmer loan, he and his wife bought a 340-acre farm with a 1,200-head hog-finishing building in northeast Iowa. Kelly also works a full-time job, as an engineer for John Deere, 30 minutes from his farm in Dubuque.

In an email, which he wrote after reading my previous post on beginning farmers (http://tiny.cc/…), Kelly said "For us the farm pays for itself, but we could not live off it while trying to pay for it (we have 3 children too)."

Kelly credits the FSA loan program for putting him in business -- sort of. "Although it took a lot of doing (3 years' worth) the FSA beginning farmer loan program made our purchase possible," he wrote.

"In a nutshell the private lenders (I used FCSA) require a 35% down payment, pretty darn hard to do. But ... the private lenders treat the FSA loan as guaranteed money ... counting toward that 35% down payment. So the FSA loans really does not buy you much itself, but it does allows you to get financing. As a side comment it lets you go in the hole a long way without much out of your pocket ... we will be digging out for at least 15 more years."

Kelly was one of several readers who responded to my post by sending emails or sharing thoughts in the comments section. I thank all of them. Please, keep those cards and letters coming, folks.

Jay Chambers, who farms 700 acres in Medford, Minnesota, sent an email saying in 2008, when he was looking to purchase 40 acres, he had inquired about an FSA loan. But he found the process "time consuming" and complained that the loan officer wanted to tell him how to run his business. "His advice included things like using generic seed corn instead of the expensive 'DeKalb, Pioneer, etc.' The more I got involved the more I was reluctant to have these people telling me how to make my operation 'efficient.' I ended up financing this farm through a different lender."

Nebraska farmer Jason Bode offered a particularly interesting commentary, which you can find at the bottom of my previous post (http://tiny.cc/…). He applied for USDA and Nebraska farm loans but failed to qualify because he and his wife had savings in their 401k accounts. He offered what looked to me like an original idea for a beginning-farmer program: exempt sales of land to a beginning farmer from capital-gains tax, and waive income taxes on seller-financed interest income. Whatever you think of this idea, it addresses a significant problem: The beginning farmer has a hard time competing in competitive land auctions.

None of this is to say farmers should oppose student-loan forgiveness. There may be better ways to help beginning farmers. But what if loan forgiveness is the one most likely to win Congressional approval? The average age of a beginning farmer is an astonishing 49. In my previous post I speculated this was because mom and dad were refusing to step aside until late in life. But who knows? Maybe it's also because at 49, very few beginning farmers have to worry about student-loan payments.

Urban Lehner

urbanity@hotmail.com

(CZ)

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