Rebecca Wood, a single mother at the age of 45, was already facing high medical bills in 2020 when she discovered she was being charged a $2.49 “program fee” every time she added money to her daughter’s school lunch account.
With more schools adopting cashless payment systems, districts are partnering with processing companies that charge fees as high as $3.25 or 4% to 5% per transaction, according to a recent report from the Consumer Financial Protection Bureau. Despite the legal requirement for schools to offer a fee-free option to pay by cash or check, transparency around this option is often lacking.
“It wouldn’t have been a big deal if I had hundreds of dollars to deposit in her account at the beginning of the year,” Wood explained. “I didn’t. I was paying as I went, which meant I was paying a fee every time. The $2.50 transaction fee equaled the price of a lunch. So, I’d pay for six lunches, but only receive five.”
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The U.S. Department of Agriculture, which oversees the federal policy on fee-free school lunch, mandated that districts inform families of their options since 2017. However, even when parents are aware, having to pay by cash or check to avoid fees can be burdensome.
“It’s just massively inconvenient,” shared Joanna Roa, 43, who has two school-aged children and works at Clemson University in South Carolina as a library specialist.
Roa recalled that when her son was in first grade and she saw the $3.25-per-transaction fee for lunch account transactions, she and her husband opted to pack his lunches instead.
“A dollar here and there, I expected,” she stated. “But $3.25 per transaction, particularly in rural South Carolina where the cost of living is lower — as are the salaries — is significant.”
Roa pointed out that for two working parents, preparing lunch for two kids every day added to the burden of time and effort. While her school district has provided free lunches in school for the past two years due to surplus funds, Roa acknowledged that this could change at any point.
In a review of the 300 largest public school districts in the U.S., the CFPB found that 87% of the sampled districts partner 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. For families with lower incomes who cannot afford to deposit large sums at once, these fees can become a weekly or even more frequent burden, disproportionately increasing costs.
Families eligible for free or reduced-price lunch may pay up to 60 cents per dollar in fees when paying for school lunches electronically, according to the report.
Upon researching the fees, Wood discovered the USDA requirement for fee-free payment by cash or check. When she brought this to the attention of the superintendent of her daughter’s Massachusetts school district, the administrator admitted that the lack of transparency was an oversight.
Wood had planned to protest by paying for her daughter’s lunches in coins at the school office with other parents. However, the COVID-19 pandemic intervened, leading to changes in school lunch policy.
In the following years, Wood participated in a campaign that successfully advocated for universal free school lunches in the state. Yet, she continues to speak out against school processing fees for families.
“Even if lunch itself is free, additional transactions like buying something a la carte or an extra lunch still incur fees,” Wood emphasized. “They are taking money from those who need it the most.”
While payment companies argue that school districts have the opportunity to negotiate fees and rates when forming contracts, the CFPB found that complex company structures “may insulate companies from competition and make school districts less likely to negotiate.”
According to the report, just 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 stated, “including those that may violate federal consumer protection law.”
The companies mentioned in the report did not respond to requests for comment.
“I was paying as I went, which meant I was paying a fee every time. The $2.50 transaction fee was the price of a lunch. So I’d pay for six lunches, but only get five.”
Rebecca Wood, Maynard, Massachusetts
Under federal policy, you always have the right to pay by cash or check. You can also request that your school district negotiate lower fees with their payment processing company or ask the district to cover the fees directly, giving them leverage in contract negotiations.
If your school is located in a low-income area, you can also check if your district qualifies for the Community Eligibility Provision, allowing the school to provide free breakfast and lunch to all enrolled students.
More information on CEP is available on the U.S. Department of Agriculture’s website at fns.usda.gov/cn/cep.
