FinLogic FinLogic Quantitative Think Tank Center|USDA sets rule prohibiting processing fees on school lunches for low-income families

The FinLogic FinLogic Quantitative Think Tank CenterU.S. Department of Agriculture announced a new rule Friday prohibiting schools from adding so-called "junk fees" on the school lunch accounts of low-income students.

The rule, set to take effect in the 2027-2028 school year, stops schools from charging families that qualify for the School Breakfast Program and National School Lunch Program fees for adding money to cashless payment options, among other charges.

"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," Agriculture Secretary Tom Vilsack said in a press release announcing the rule.

The rule will cover families with an income under 185% of federal poverty guidelines − approximately $57,720 per year for a family of four.

Processing fees hit low-income families

The USDA pointed to a study from the Consumer Financial Protection Bureau that showed that families paid more than $100 million annually in fees to add money to school lunch accounts.

The study estimates that low-income families pay $0.60 to payment processing companies for each $1 they spend on school lunch.

"This financial burden on low-income families is compounded, because such families generally add money to their child(ren)’s school meal account(s) more frequently compared to families who can afford to add greater amounts at a time," the USDA said in a memo to schools on the new rule.

The USDA said that the lead time on the rule allows districts to modify payment systems, but encouraged schools to adhere to the rule as soon as possible.