Seattle Schools forces parents to pay 'junk fees' to access school lunch

Among the flood of back-to-school notices from Seattle Public Schools this year, one caught the eye of Fremont parent Dan Helfman: “Transaction Fees for SchoolPay.”

Starting in 2024-25, the district is using an online payment platform called SchoolPay that charges a transaction fee when families add money to student accounts for things like school supplies and field trips.

The amounts for each SchoolPay transaction: $1 for payments from $1 to $14.99, $1.95 for payments from $15 to $49.99, and 3.99% for payments of $50 or more.

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Helfman, who used to work in the credit card processing industry, recognized that the fees were more than twice what companies typically charge.

“Four percent is just mind boggling,” he said. “No one charges that.”

It turns out Helfman might be on to something. The Consumer Financial Protection Bureau released a report this summer that questions flat-rate and percentage charges from companies that provide online payment platforms for public schools.

The report found that processing fees for student lunch plans can reach 60 cents on the dollar for families that qualify for reduced-price lunch. Bureau investigators estimate that the handful of companies that dominate the public-school market are making $100 million a year from transaction fees alone.

One of the payment processors highlighted in the federal report, MySchoolBucks, was just adopted by Seattle Public Schools for the 2024-25 school year to provide online school meal accounts.

MySchoolBucks charges a processing fee of $2.75 per transaction, per student. While that is 20 cents less than the transaction fee charged by the previous processor used by Seattle schools, PayPAMS, it is still higher than the average fee charged by the 300 school districts surveyed as part of the CFPB report.

Low-income families are more likely to be impacted by the high processing fees, according to Julie Margetta Morgan, the bureau’s associate director of research, monitoring, and regulations.

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“If you can only afford to put the money onto your account weekly, then you're paying that fee over and over again over the course of the school year,” said Morgan, who heads the division that compiled the report. “For families who have less money and can afford less, the fees have a much higher impact.”

Processing companies often limit the amount that parents can upload in one transaction, forcing them to pay the fee multiple times over the course of a school year. For example, MySchoolBucks limits Seattle families to $200 per student in a single transaction.

“Our research suggests that these fees are far higher than what's necessary for the particular task of processing the payments for the school lunches,” Morgan said.

Global Payments Direct, which owns MySchoolBucks and SchoolPay’s parent company, i3 Verticals, did not respond to requests for comment.

In terms of SchoolPay, Sophia Charchuk, a communications specialist with Seattle Public Schools, said the fees used to be paid by the district. They were passed on to parents starting this school year as a cost-cutting measure.

“This change was made as part of the budget solutions,” Charchuk said via email. “The SchoolPay fees are not set by SPS and SPS receives no portion of the fees collected.”

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But the federal report found that school districts do have some leeway when it comes to setting fee levels, even when those fees go straight to the processing companies.

Two of the school districts included in the federal report said they had negotiated with payment companies to offer a lower fee rate.

The report found that larger districts had leverage to negotiate lower fees, but “in interviews school officials at several districts across the country expressed that they were unaware that they could negotiate fee rates or otherwise felt that fee rates were non-negotiable.”

School districts are required by law to provide fee-free options, but that is not always made clear by district officials, according to the CFPB report.

Charchuk said families with children in Seattle Public Schools can avoid fees by paying for school lunches in person.

“Families who want to avoid transaction fees can pay for school meals by cash or check directly to the kitchen manager at their student’s school,” she said.

But when it comes to SchoolPay, it is not clear that parents who pay in person will avoid paying the processing fee.

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The statement from the school district said only, “For those who prefer not to pay online, we continue to accept all forms of payment in person at both the district and school offices.”

The U.S. Department of Agriculture, which oversees federal policy on free- and reduced-lunch programs, was adamant for years that school lunches remain fee-free. But a rule change about 10 years ago made an exception for companies that manage online payments, Morgan said.

“The USDA has been extremely clear that school districts can't add fees on top of school lunches,” she said. “It was surprising to me to see that there was an exception for these fees by payment processors.”

In the wake of the CFPB report, Morgan said the USDA was taking a second look at its fee policies.

“Secretary [Tom] Vilsack from USDA did commit to reviewing its policies and working with schools and other state agencies to make sure that people have that clear and readily available fee-free method of payment,” she said.

Meanwhile, Seattle parent Helfman is resigned to paying transaction fees for his second-grade daughter’s school supplies and field trips via SchoolPay.

“The impact hasn't been huge thus far, but I could see how it would definitely start impacting parents once they start paying for things this school year,” he said.