A new federal rule will prohibit schools from charging low-income students transaction fees when their families electronically deposit funds into their lunch accounts.
The policy was announced Friday by the Agriculture Department, which administers the national program that serves billions of student lunches and breakfasts every year.
The ban on the “junk fees,” which will go into effect in the 2027-28 academic year, applies to students eligible for free and reduced-price school meals — those whose annual household incomes are 185% or less of the federal poverty level, which equals $57,720 maximum for a family of four.
The Consumer Financial Protection Bureau, a government agency that aims to ensure fairness in the marketplace, estimated in a report in July that school meal payment processors collect more than $100 million in transaction fees a year.
The report said the fees disproportionately burden lower-income households, which tend to make smaller, more frequent electronic deposits into their children’s accounts.
That means that although students who qualify for reduced-price school meals cannot be charged more than 30 cents for breakfast and 40 cents for lunch, many families end up paying additional costs because of the fees they incur every time they deposit money into their meal accounts.
The average processing charge is $2.37 for payment processors that charge a flat rate and 4.4% of the total transaction for those that charge a percentage, according to the report.
“The policy announced today will ensure fairness for all students receiving meals at a reduced price, even when paying online,” the Agriculture Department said in a statement Friday.
Anti-hunger advocates praised the decision.
“We are thrilled,” said Marisa Kirk-Epstein, managing director for research and policy of the No Kid Hungry campaign at the nonprofit organization Share Our Strength. “This rule change is a huge win for parents trying to stretch every dollar. Eliminating these processing fees for free and reduced-price meals means one less burden for parents and lets kids just focus on learning and being a kid.”
In September, a group of senators demanded in a letter that the Agriculture Department take action against what they called “sham fees.”
“Every day, greedy payment processing companies are ripping off working families, snatching dollars meant to pay for kids’ school lunches in order to pad their profits,” read the letter, which was signed by Elizabeth Warren of Massachusetts and other Democratic senators, as well as Sen. Bernie Sanders, I-Vt. “It is unacceptable that parents face exorbitant fees just so their children can eat school lunch.”
Warren encouraged the Agriculture Department to continue working on eliminating fees.
“I’ve long said that junk fees on school meals just shouldn’t exist, and this new action from the Biden-Harris administration is an important first step toward making that a reality,” she told NBC News in a statement Monday. “USDA should keep working hard on this issue so that families aren’t squeezed for every nickel and dime.”
An Agriculture Department spokesperson said in an email that the agency’s goal is to eventually eliminate the junk fees for all families regardless of income level. Agriculture Secretary Tom Vilsack, who has advocated for free school meals for all children, called the ban on transaction fees for some families a “major” step.
“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 in a statement Friday. “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.”
