NEW YORK (AP) — The U.S. Department of Agriculture announced that students eligible for free or reduced-price school meals cannot be charged. processing fee from 2027.

School districts are currently working with processing companies to offer cashless payment systems to families. But companies can charge a “processing fee” for each transaction.

By law, students who qualify for reduced-price meals cannot be charged more than 30 cents for breakfast and 40 cents for lunch. However, with processing fees, families can end up paying 10 times that amount. Processing companies charge as much as $3.25, or 4 to 5 percent per transaction, according to a recent report from the Consumer Financial Protection Bureau.

For low-income families who cannot afford to charge large sums at once, processing fees can arrive weekly or more frequently, increasing costs disproportionately. Families who qualify for free or reduced-price lunch pay up to 60 cents per dollar in fees when they pay for school meals electronically, according to the report.

The new policy of the Ministry of Agriculture comes into force from the 2027-2028 school year. Through this rule, USDA will reduce costs for families with incomes below 185 percent of the federal poverty guidelines, which equates to $57,720 for a family of four.

“The USDA and schools across America share the common goal of feeding schoolchildren and giving them the fuel they need to learn, grow and thrive,” the Secretary of Agriculture said Friday , Tom Vilsack, in a press release. “While today’s action to eliminate additional fees for low-income households is a major step in the right direction, the most equitable path forward is to provide every child with free access to healthy school meals . We will continue to work with Congress to achieve this goal so that all children get the nutrition they need to reach their full potential.

The USDA’s decision follows a CFPB report that found online payments for school meals primarily affect low-income families. School meal costs collectively cost families more than $100 million each year, according to the report.

The U.S. Department of Agriculture has required school districts to inform families of their options since 2017, but even when parents are aware, having to pay cash or check to avoid fees can be burdensome.

“It’s extremely embarrassing,” said Joanna Roa, 43, who works at Clemson University in South Carolina as a librarian and has two school-age children.

Roa said 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 decided to send him to school with shopping carts -meal.

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

Roa said preparing lunch for two children each day had become a burden in terms of time and effort for two working parents. For the past two years, with surplus funds, his school district has provided free school meals, which has been a game-changer, but Roa said that could end at any time.

In its review of the 300 largest public school districts in the United States, the CFPB found that 87% of the districts sampled have contracts with payment processors. In these districts, companies charge an average of $2.37, or 4.4 percent of the total transaction amount, each time money is added to a child’s account.

While payment companies argue that school districts can negotiate fees and rates before agreeing to contracts, the CFPB found that complex corporate structures “can insulate companies from competition and make school districts less likely to negotiate.” Only three companies – MySchoolBucks, SchoolCafe and LINQ Connect – dominate the market, according to the report.

Without the ability to choose which company to work with, “families have fewer ways to avoid harmful practices,” the agency said, “including those that could violate federal consumer protection law.”

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