The U.S. Department of Agriculture announced that students eligible for free or reduced-price school meals will no longer be charged processing fees, also known as junk fees, starting in 2027.
School districts currently work with processing companies to offer a cashless payment system for families. But companies may charge a “processing fee” for each transaction. By law, students who are eligible for reduced price meals cannot be charged more than 30 cents for breakfast and 40 cents for lunch. However, with processing fees added, families may have to pay 10 times that amount. According to a recent report from the Consumer Financial Protection Bureau, processing companies charge $3.25 or 4% to 5% per transaction.
For low-income families who aren't able to load large sums at once, processing fees can come weekly or even more frequently, driving up costs disproportionately. According to the report, families who qualify for free or reduced lunch pay a fee of 60 cents per dollar when paying electronically for school lunches.
The new Agriculture Department policy takes effect beginning with the 2027-2028 school year. With this rule, the USDA will reduce costs for households with incomes under 185% of the federal poverty guidelines, which equates to $57,720 for a family of four.
“USDA and schools across America share a common goal of nourishing schoolchildren and giving them the fuel they need to learn, grow and thrive,” Agriculture Secretary Tom Vilsack said in a statement Friday. “While today’s action to eliminate additional fees for low-income families is a big step in the right direction, the most equitable path forward is to provide every child with access to healthy school meals at no cost to them. We will move forward We will continue to work with Congress toward that goal so that all children have the nutrition they need to reach their full potential.”
The USDA decision comes after a CFPB report that found online school meal payments primarily impacts low-income families. According to the report, school lunch fees collectively cost families more than $100 million each year.
The U.S. Department of Agriculture has mandated since 2017 that school districts inform families about their options, but even when parents are aware, paying by cash or check to avoid fees can be burdensome.
“It's very inconvenient,” said Joanna Roa, 43, who works as a library specialist at Clemson University in South Carolina and has two school-age children.
Roa said that when her son was in first grade and she noticed a $3.25 per transaction fee for transactions from the lunch account, she and her husband decided to send him to school with a packed lunch.
“A dollar here and there, I hoped,” she said. “But $3.25 per transaction, especially here in rural South Carolina where the cost of living is very low – as are the wages – is a lot.”
Packing lunch for two children every day became a burden in both time and effort for two working parents, Roa said. For the past two years, due to additional funding, his school district has been providing free school lunches, which has changed the equation, but Roa said it could end at any time.
In its review of America's 300 largest public school districts, the CFPB found that 87% of the sample districts contract with payment processors. In those districts, companies charge an average of $2.37, or 4.4% of total transactions, every time they add money to a child's account.
While payment companies maintain that school districts can negotiate fees and rates before agreeing to contracts, the CFPB found that complex company structures “can shield companies from competition and make school districts less likely to negotiate.” Can do.” According to the report, only three companies – MySchoolBucks, SchoolCafe, and LINQ Connect – dominate the market.
“Without the ability to choose which company to work with, families have fewer ways to avoid harmful practices,” including those that may violate federal consumer protection law, the agency said.
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