Discount Rate Optimization

Introduction:

The level of E-rate discounts available to a particular school or library applicant is governed by the affluence of the community as determined by the percentage of students eligible for the National School Lunch Program (or an equivalent measure). Income eligibility guidelines for the NSLP are published in the Federal Register annually by the Department of Agriculture.

The basic E-rate discount schedule is shown below:

 

 

INCOME

Measured by % of students eligible for the National School Lunch Program

CATEGORY ONE

CATEGORY TWO

URBAN

Discount

RURAL

Discount

URBAN

Discount

RURAL

Discount

Less than 1%

20%

25%

20%

25%

1% to 19%

40%

50%

40%

50%

20% to 34%

50%

60%

50%

60%

35% to 49%

60%

70%

60%

70%

50% to 74%

80%

80%

80%

80%

75% to 100%

90%

90%

85%

85%

 

 

 

 

 

 

 

 

 

 

 

 

 

Important:

The key to maximizing E-rate discounts for any applicant is to recognize that the entity’sdiscount rate is determined by student lunch program eligibility, NOT by lunch program participation.

Public schools calculating their discount rates on lunch program participation are not only shortchanging themselves, they are also shortchanging any local public libraries that are relying on the schools' E-rate eligibility data for their own discount rate calculations.

Common Errors:

E-Rate Central has seen the following types of errors in applicant calculations of discount rates:

  1. A school district exhibiting significantly lower percentages of student "eligibility" in its high schools than in its elementary schools. This is almost always a case of using participation numbers. For a variety of societal reasons - none related to actual eligibility - high school students are much less likely to partake of free or reduced price lunches.
  2. A private school applying for only the minimum 20% discount because it has no lunch program or has no access to equivalent data.

Practical Suggestions:

Obtaining lunch program eligibility data is often a lot more difficult than simply using participation data. Two practical factors are worth considering:

  1. Particular attention should be paid to any school exhibiting poverty level indicators close to the transition points on the E-rate discount matrix (i.e., at 1%, 20%, 35%, 50%, and 75%). Finding a small incremental percentage of eligible students may not be that difficult, but could add 10% (or more) to the discount.
  2. For public schools, in particular, extra work in validating higher E-rate discounts may yield data that could improve other aid ratios. In many cases, data collected to increase the present year's ratio also will be useful in subsequent years.

Discount Rate Tips:

Tip 1: Although lunch program participation data is not optimal, it has its uses.

  • Participation data is available nationwide and is used by the SLD's Program Integrity Assurance program. Applicants reporting higher eligibility should be prepared to carefully document the differences.
  • Libraries, unable to get better data from their local schools, may be forced to rely on publicly available data.
  • Two internet sources for the data are shown below. The first source provides national data but only for free lunches. The second is for NYS schools only and provides both free and reduced lunch statistics.
    • Federal: National Center for Educational Statistics ("NCES") Common Core of Data
    • New York: New York State Education Department's Child Nutrition Management System.
    • Many state education agencies maintain public data regarding enrollment and NSLP eligibility by entity (Reference E-Rate Central “State Info” section).

Tip 2: Improve eligibility data with new surveys and sibling searches.

  • Schools often conduct surveys at the beginning of the school year to determine planned lunch program participation. These surveys should be rewritten to stress that income data is needed even if the students do not plan to participate in the lunch (or milk) programs. Beginning in FY2015, applicants may use NSLP applications as their survey instrument.
  • Sample E-Rate Survey Letter
  • Sample E-Rate Survey Letter - Spanish version
  • Sibling search - When large discrepancies are found between elementary and secondary school eligibility, school records can be searched by name and address to find upper school siblings of eligible lower school students. Improved eligibility data for a single district school can payoff in terms of an increased aggregate discount rate for the entire district. More importantly, because of the FCC's priority funding rules, a higher rate for an individual school could mean the difference between a significant site-specific discount for internal connection expenses versus no discount at all.

Tip 3: Consider alternatives to Federal free and reduced lunch statistics.

  • The actual rules and regulations summarizing the use of alternative poverty level indicators are provided at the end of this section.
  • The eligibility criteria for the Federal free milk program coincides with the same family income levels as the reduced price lunch program and is therefore interchangeable.
  • E-Rate Central has had excellent success using Medicaid data (although care must be taken to preserve the confidentiality of the data).

Tip 4: Provision 1,2 or 3 Schools and Community Eligibility Provision.

  • The National School Lunch Act incorporates three alternative provisions to the normal requirements for annual determinations of eligibility for free and reduced price school meals. For schools that meet the requirements of one of these provisions, annual notification of program availability and certification of children eligible for free meals may be reduced to once every two consecutive school years or less. USAC defers to these reporting requirements and does not require more documentation than is required under these provisions.
  • Beginning with FY2015, schools and school districts participating in the Community Eligibility Provision (CEP) use their approved direct certification percentage to determine their NSLP percentage.

 

For each of its individual schools that participate in CEP, a school district will maintain the correct direct certification percentage (rather than the number of students eligible for NSLP) and the total student population of the school. The percentage of directly certified students will be multiplied by the CEP national multiplier (currently 1.6) to calculate the effective number of students eligible for NSLP. This calculation is capped at 100 percent of the student population for the purposes of determining the discount.

Regulations Governing Alternative Eligibility Measures:

Although most public schools use Federal lunch program eligibility statistics to determine the allowable level of discounts under the E-rate program, the FCC's rules permit alternative tests that may actually give private and public schools more flexibility. A 20% discount applies to all schools regardless of affluence level, but the discount doubles to at least 40% if 1% or more of the students qualify for the lunch program or under an equivalent measure. Almost any private school with a scholarship program should be able to easily exceed the 1% test.

The following language is from the FCC's Report and Order 510. Emphasis has been added to highlight the alternative mechanisms and a key footnote is also provided:

Report and Order 510

We conclude that a school may use either an actual count of students eligible for the national school lunch program or federally-approved alternative mechanisms* to determine the level of poverty for purposes of the universal service discount program. Alternative mechanisms may prove useful for schools that do not participate in the national school lunch program or schools that participate in the lunch program but experience a problem with undercounting eligible students (e.g., high schools, rural schools, and urban schools with highly transient populations). Schools that choose not to use an actual count of students eligible for the national school lunch program may use only the federally-approved alternative mechanisms contained in Title I of the Improving America's Schools Act, which equate one measure of poverty with another. These alternative mechanisms permit schools to choose from among existing sources of poverty data a surrogate for determining the number of students who would be eligible for the national school lunch program.

 Income eligibility guidelines (published annually by the Dept. of Agriculture to establish poverty levels of family income) for current and prior school years can be found below:

Footnote:See 34 C.F.R. § 200.28(a)(2)(i)(B) . Under this regulation, enacted pursuant to Title I of the Improving America's Schools Act of 1994, private schools that do not have access to the same poverty data that public schools use to count children from low-income families may use comparable data "(1) [c]ollected through alternative means such as a survey" or "(2) [f]rom existing sources such as AFDC or tuition scholarship programs." 34 C.F.R. §200.28(a)(2)(i)(B)(1) and (2). We note, however, that AFDC will be altered significantly by the recently-enacted welfare reform law. See The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, P.L. 104-193. See supra section VIII for a discussion of other means-tested qualification standards.