The U.S. Department of Agriculture has announced that students who qualify for free or reduced-price school meals will not be charged processing fees, also known as junk fees, starting in 2027.
School districts are currently working with processing companies to offer cashless payment systems for families. But the companies can charge a ‘processing fee’ for each transaction. By law, students who qualify for discounted meals can be charged no more than 30 cents for breakfast and 40 cents for lunch. However, with processing fees, families could end up paying ten times that amount. Processing companies charge as much as $3.25, or 4% to 5%, per transaction, according to a recent report from the Consumer Financial Protection Bureau.
For lower-income families who cannot afford to charge large amounts at once, processing fees may accrue weekly or even more frequently, causing costs to rise disproportionately. Families who qualify for free or reduced lunch will pay as much as 60 cents on the dollar in fees if they pay for school lunch electronically, according to the report.
The Ministry of Agriculture’s new policy will come into effect from the 2027-2028 school year. With this rule, the USDA will reduce costs for families with incomes below 185% of the federal poverty guidelines, which amounts to $57,720 for a family of four.
“USDA and schools across America share the common goal of feeding schoolchildren and giving them the fuel they need to learn, grow and thrive,” Secretary of Agriculture Tom Vilsack said in a statement Friday. “While today’s action to eliminate additional charges for lower-income households is an important step in the right direction, the most equitable path forward is offering every child free access to healthy school meals. We will continue to work with Congress to take steps toward that goal, so that all children get the nutrition they need to reach their full potential.”
The USDA’s decision follows a CFPB report showing that online school meal payments mainly affect low-income families. According to the report, school meals collectively cost families more than $100 million a year.
The U.S. Department of Agriculture has required school districts to inform families of their options since 2017, but even if parents are aware, having to pay by cash or check to avoid fees can be inconvenient.
“It’s just extremely difficult,” said Joanna Roa, 43, who works as a library specialist at Clemson University in South Carolina and has two school-age children.
Roa said when her son was in first grade and she saw the $3.25 per transaction fee for lunch account transactions, she and her husband decided to send him to school with packed lunches instead.
“I expected a dollar here and there,” she said. “But $3.25 per transaction, especially here in rural South Carolina where the cost of living is a lot lower — as are salaries — is a lot.”
Roa said packing lunch for two children every day became a burden, both in terms of time and effort for two working parents. For the past two years, thanks to surplus funds, her school district has provided free school lunches, which has changed the equation, but Roa said that could end at any time.
In its study of the 300 largest public school districts in the U.S., the CFPB found that 87% of sampled districts have contracts with payment processors. Within those districts, the companies charge an average of $2.37, or 4.4% of the total transaction, each time money is added to a child’s account.
While payment companies argue that school districts can negotiate fees and rates before agreeing to contracts, the CFPB found that complex corporate structures “can insulate companies from competition and make school districts less likely to negotiate.” 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,” the agency said, “including practices that may violate federal consumer protection laws.”
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