USDA bans school lunch fees for low-income families

NEW YORK (AP) — The U.S. Department of Agriculture has announced that students eligible for free and reduced-price school meals will not be charged. processing fee starting from 2027.

School districts are now working with processing companies to offer cashless payment systems to families. But companies may charge a “processing fee” for each transaction.

By law, students eligible for reduced price meals cannot be charged more than 30 cents for breakfast and 40 cents for lunch. However, due to processing fees, families could end up paying 10 times that amount. According to a recent report from the Consumer Financial Protection Bureau, processing companies charge up to $3.25, or 4% to 5% per transaction.

For lower-income families who cannot afford to download large amounts at once, processing fees may come weekly or even more frequently, increasing costs disproportionately. Families who qualify for free or reduced lunch pay up to 60 cents on the dollar when paying for school lunches electronically, according to the report.

The new Department of Agriculture policy goes into effect for the 2027-2028 school year. With this rule, the USDA will reduce costs for families with incomes below 185% of the federal poverty level, which is $57,720 for a family of four.

“USDA and schools across America share a common goal—feeding students 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 remove surcharges for low-income households is an important step in the right direction, the fairest way forward is to ensure that every child has free access to healthy school meals. We will continue to work with Congress to move toward this goal of ensuring all children have the nutrition they need to reach their full potential.”

The USDA’s decision follows a CFPB report that found online school meal payments predominantly impact low-income families. School lunch fees collectively cost families more than $100 million a year, according to the report.

The USDA has required school districts to inform families about their options since 2017, but even if parents know, having to pay with cash or check to avoid fees can be burdensome.

“It’s just incredibly inconvenient,” said Joanna Roa, 43, who works as a library specialist at Clemson University in South Carolina and has two school-aged children.

Roa said that when her son entered first grade and she saw the $3.25 transaction fee on his lunch bill, she and her husband decided to send him to school with boxed lunches instead.

“I was expecting a dollar here and there,” she said. “But $3.25 per transaction, especially here in rural South Carolina where the cost of living is much lower and so are wages, is a lot.”

Roa says packing lunch for two children every day has become a burden for two working parents, requiring both time and effort. For the past two years, her school district has been providing free school lunches thanks to surplus funds, which has changed the equation, but Roa said that could end at any moment.

In its review of the 300 largest public school districts in the United States, the CFPB found that 87% of the districts sampled contract with payment processors. In these counties, companies charge an average of $2.37, or 4.4% of the total transaction amount, each time money is added to a child’s account.

While payment companies argue that school districts can negotiate fees and rates before they agree to contracts, the CFPB found that complex company structures “can insulate companies from competition and make school districts less likely to negotiate ” According to the report, just three companies dominate the market – MySchoolBucks, SchoolCafe and LINQ Connect.

Without the ability to choose which company to do business with, “families will have fewer ways to avoid harmful practices,” the agency said, “including those that may violate federal consumer protection law.”

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