USDA Water and Waste Disposal grants for small towns
If your town or water district serves a rural area and can't borrow on reasonable terms elsewhere, USDA Rural Development's Water and Waste Disposal Loan and Grant Program may pay for a new or better water or sewer system. It's mainly a loan program, but a grant can be added to keep user rates reasonable. This page sets out who can apply, what it pays for, how the grant part is worked out and how to apply.
What it pays for
USDA says the program funds clean and reliable drinking water systems, sanitary sewage disposal, sanitary solid waste disposal and storm water drainage for households and businesses in eligible rural areas. The money can pay for building, buying or improving:
- drinking water sourcing, treatment, storage and distribution
- sewer collection, transmission, treatment and disposal
- solid waste collection, disposal and closure
- storm water collection, transmission and disposal
In some cases it can also cover related costs such as legal and engineering fees, land and water rights, permits and equipment, start-up operations and maintenance, and interest during construction. The full list is in 7 CFR 1780.7 and 1780.9.
Who can apply
USDA lists most state and local governmental entities, private nonprofits and federally recognized tribes. Under 7 CFR 1780.7, a public body includes a municipality, county, district, authority or other political subdivision of a state.
There are three main tests:
- The area is rural. Rural areas and towns of 10,000 people or fewer, tribal lands in rural areas, and colonias. USDA's program page links to a tool for checking eligible addresses.
- You can't get credit elsewhere. The program is for applicants that can't otherwise get commercial credit on reasonable terms, and you have to certify this in writing.
- The project is sound. You need the legal authority to build, run and maintain the system, the facilities have to serve a public purpose, and the project has to be financially sustainable.
Loans, and when a grant is added
The main help is a long-term, low-interest loan, paid back over up to 40 years, based on the useful life of the facilities. Rates are fixed, and depend on the need for the project and the median household income of the area served. USDA's program page shows these rates for 1 October to 31 December 2026:
| Rate | Interest |
|---|---|
| Poverty | 2.875% |
| Intermediate | 3.750% |
| Market | 4.750% |
If funds are available, a grant may be combined with the loan if it's needed to keep user costs reasonable. Under 7 CFR 1780.10, the grant can't be more than:
- 75 percent of eligible project costs, when the median household income of the service area is below the higher of the poverty line or 80 percent of the state's nonmetropolitan median household income, and the project is needed to fix a health or sanitary problem
- 45 percent of eligible project costs, when the median household income is above that level but no more than 100 percent of the state's nonmetropolitan median household income
Those are maximums. Under the same rule, no grant can be made where the service area's median household income is more than 100 percent of the state's nonmetropolitan median household income. The grant is also sized so that user costs don't fall below those of similar systems.
How to apply
USDA accepts applications on an ongoing basis from October 1 to September 30. You can apply online through RD Apply or through your local Rural Development office. USDA asks applicants to speak to a program specialist in their state before filling in any forms, and says program details may change, so check the current rules with your state office first.
For bigger projects or larger towns, also look at your state's revolving fund. Our page on state revolving fund (SRF) loans covers it.
Get a free list of open grants
Your Evenings runs a done-for-you grant desk for local governments. Each month we find the grants your government is eligible for, draft the applications for your staff to review and submit, and keep track of the deadlines. It's a flat $2,500 a month, with no success fee. Everything is done by email and shared documents, so there are no calls to schedule.
Funders decide which applications are awarded, so we can't promise that any application will be funded.
Email us for a free list of open grants · See the grant desk
Sources
All read on 30 October 2026:
- USDA Rural Development: Water & Waste Disposal Loan & Grant Program (interest rates shown for October 1 to December 31, 2026)
- 7 CFR part 1780, Water and Waste Loans and Grants, sections 1780.7 (eligibility), 1780.9 (eligible purposes), 1780.10 (limitations) and 1780.13 (rates and terms), Electronic Code of Federal Regulations, current version
This page summarizes the sources above. It isn't legal or financial advice. Your state Rural Development office has the final word on eligibility, rates and grant amounts.
Written with AI assistance by Your Evenings. Last updated October 30, 2026.