US consumer watchdog finds that school lunch fees are taking a toll on parents

NEW YORK — Single mother Rebecca Wood, 45, was already facing hefty medical bills in 2020 when she noticed she was charged a $2.49 “program fee” every time she deposited money into her daughter’s school lunch account.

As more schools move to cashless payment systems, more districts have signed contracts with processing companies that charge as much as $3.25, or 4% to 5%, per transaction, according to a new report from the Consumer Financial Protection Bureau. The report found that while schools are legally required to offer a free option to pay by cash or check, there is rarely any transparency around the topic.

“It wouldn’t have been a big deal if I had been able to deposit hundreds of dollars into her account at the beginning of the year,” Wood said. “I didn’t. I was paying as I went, which meant I was paying a fee each time. The $2.50 transaction fee was the price of a lunch. So I paid for six lunches and only got five.”

The U.S. Department of Agriculture, which oversees federal policy on free school meals, began requiring school districts to inform families about their options in 2017. But even when parents are informed, it can be difficult to pay by cash or check to avoid fees.

“It’s just really 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 saw the $3.25 transaction fee for lunch account transactions, she and her husband decided to send him to school with a packed lunch.

“A dollar here and there, I expected,” she said. “But $3.25 per transaction, especially here in rural South Carolina where the cost of living is much lower — as are the salaries — is a lot.”

Roa said packing lunches for two children every day, for two working parents, has been an increased burden of time and effort. For the past two years, her school district has provided free school lunches, thanks to surplus funds, which has changed the equation, but Roa said that could end at any time.

A CFPB study of the 300 largest public school districts in the U.S. found that 87% of the districts surveyed 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. For lower-income families who can’t afford to deposit large amounts at once, those fees can add up weekly or more often, raising costs disproportionately. Families who qualify for free or reduced lunch pay as much as 60 cents on the dollar of fees when paying for school meals electronically, the report found.

In Wood’s case, she researched the fees and learned about the USDA requirement to offer free payments in cash or check. When she brought this up with the superintendent of her daughter’s Massachusetts school district, the administrator said the lack of transparency was a mistake. To protest, Wood had planned to pay for her daughter’s lunches with coins at the school office, along with other parents. But then the pandemic hit, changing school lunch policies, among other things.

In the years since, Wood has been part of a successful campaign for free school meals for all children in the state, but she continues to protest against school processing fees for families.

“Even if the lunch itself is free, if you want to buy something a la carte, or an additional lunch, or any other transaction, you still have to pay that fee,” Wood said. “They’re taking money from people who need it the most.”

While payment companies maintain that school districts have the opportunity to negotiate fees and rates when they enter into contracts, the CFPB found that complex business structures “can insulate companies from competition and make school districts less likely to negotiate.” Just three companies — MySchoolBucks, SchoolCafe and LINQ Connect — dominate the market, the report said.

Without the ability to choose which company to work with, “families have fewer options to avoid harmful practices,” the agency said, “including practices that may violate the federal Consumer Protection Act.”

The companies named in the report did not respond to requests for comment.

Know that you always have the right to pay by cash or check, according to federal policy. You can also ask that your school district negotiate the fee with their payment processing company, or ask that the district cover the fee directly, which can give them leverage in negotiating a contract.

If your school is in a low-income area, you can also check to see if your district qualifies for the Community eligibility determinationwhich allows the school to provide free breakfast and lunch to all enrolled students. More information about the CEP is available at the United States Department of Agriculture website.

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