CFPB Costs of Electronic Payments in K-12 Schools

As of Fall 2023, more than 52 million students were enrolled at public schools throughout the United States.1
Over a school year, students incur a series of expenses for school
meals, bus passes, after-school programs, and technology and materials
needed for class, among other costs. As the broader payments ecosystem
continues shifting towards more digital options in the wake of the
COVID-19 pandemic, school districts are increasingly contracting with
payment processing companies to provide an avenue for families to pay
school-related expenses online. While convenient for both families and
school districts, electronic payment options present new costs and
challenges for the families using them.For
example, in many schools, families can electronically load funds into
an account that students can draw from to pay for school meals. Although
federal policy specifies that schools must provide a fee-free option
for school lunch payment, many payment processors charge a transaction
fee each time a user electronically adds money to a student’s school
cafeteria account.2
Payment processing companies have broad control over fee rates, though
payment companies maintain that school districts have the opportunity to
negotiate these rates during the contracting process. Some districts
cover part or all of this fee, but it is frequently paid by the families
who make electronic payments. Over the course of a school year,
transaction fees for electronic payments in and outside of the lunchroom
can significantly increase a family’s total spending on school-related
costs and may disproportionately impact families with lower incomes.3To
better understand the emergence of electronic payment processors in
K-12 schools, the CFPB analyzed publicly available information from the
300 largest public school districts in the U.S. and held unstructured
interviews with public school officials and companies offering these
payment platforms. The sample of school districts covers more than 16.7
million students across more than 25,000 schools. This spotlight
highlights average costs and potential risks for families using
electronic payment platforms to add money to their child’s school lunch
account and reviews the market size and landscape of companies offering
them, building upon initial observations referenced in the Fall 2023
edition of Supervisory Highlights.4<br><br>