The School Lunch Trap

Payment processors extract fees, profits from school meals

Photo by Alexander Mils on Unsplash

School meals should be free.

For all kids, every day.

Some states are making that a reality. Minnesota Gov. Tim Walz made it happen in his state.

But, in most places, kids and families pay for school meals or participate in a free/reduced school meal program.

Tennessee, where I live, has the fiscal capacity to cover the cost of school meals for all kids but has consistently rejected legislative efforts to make that a reality.

Tennessee Should Cancel School Lunch Debt

According to a recent article in Salon, students in K-12 public schools in Tennessee owe a total of more than $50 million in school lunch debt.

Even families without school meal debt often use an electronic payment processor to load funds onto a student account.

These processors often charge fees to process payments - meaning the price of school meals goes up when using them. Yet, many families have no option - a single vendor typically operates the payment system for a district.

Now, the Consumer Financial Protection Bureau (CFPB) is teaming up with the U.S. Department of Agriculture (the agency that administers school meal programs) to take on the payment processing profiteers.

According to a CFPB report:

While more than 20 unique companies offer these services to school districts nationwide, the vast majority of enrolled students are served by just three market leaders. These processors typically charge fees to add money to a student’s school lunch account, which collectively can cost families upwards of $100 million each year.

In response to the report, the USDA said it would take steps to ensure free payment processing options are made available. Secretary of Agriculture Tom Vilsack said:

"USDA will review its policies and work with schools, state oversight agencies and the payment processors to ensure that all families have a clear and readily-available fee-free payment method."