Students eligible for free or reduced-priced school meals won’t be charged processing fees starting in 2027, the Department of Agriculture has announced.
Under the current system, processing fees, or “junk fees,” as they are colloquially known, can drastically increase the cost of reduced-price meals for lower-income students.
Under the law, eligible students can be charged no more than 30 cents for breakfast and 40 cents for lunch for reduced-price school meals.
However, because most school districts work with processing companies to offer cashless payment systems, the fees associated with this option aren’t covered under the cap and families can be forced to pay much more than the mandated prices.
A Consumer Financial Protection Bureau (CFPB) report found that some processing companies can charge up to $3.25 per transaction.
The CFPB report reviewed the country’s 300 largest public school districts and found that 87 percent of sampled districts use payment processor companies. Each time money is added to a child’s account, an average of $2.37 is charged to the total transaction. In total, the CFPB estimates school lunch fees can cost families roughly $42 a year per child.
Department of Agriculture Secretary Tom Vilsack said that while eliminating junk fees is an excellent first step, a better system should be implemented that helps all school-aged children.
“While today’s action to eliminate extra fees for lower-income households is a major step in the right direction, the most equitable path forward is to offer every child access to healthy school meals at no cost,” he said.
“We will continue to work with Congress to move toward that goal so all kids have the nutrition they need to reach their full potential,” Vilsack added.
Since 2017, the Department of Agriculture has mandated that families be informed of their full range of payment options, including cash, check, and electronic payments or equivalent.
In its review, the CFPB also found that payment processing companies allow school districts to negotiate fees and rates before they agree to contracts.
However, they also discovered during the review that complex company structures and the domination of the market by three companies “may insulate companies from competition and make school districts less likely to negotiate.”
According to the CFPB, “families have fewer ways to avoid harmful practices” without a choice in which payment processing company to work with.
