News

New discount method could help—or hurt—eRate applicants

By Dennis Pierce, Special Projects Editor, eSchool News
September 10th, 2014

School districts must use a single discount percentage for all of their schools, leading to more—or less—funding for some

calculating-discount-rate

The changes have important implications for schools.

[Editor’s note: This is the fifth in a series of articles examining the new eRate rules and how they will affect schools.]

The FCC’s new eRate rules include important changes in how school districts must calculate their discount percentage. Some districts stand to benefit from these changes, while others could see their eRate funding reduced.

In this report, you’ll learn what these changes are—and how they’ll affect your schools.

The eRate provides discounts ranging from 20 percent to 90 percent of the cost of telecommunications services, internet access, and internal connectivity to eligible schools and libraries. Now indexed to inflation, the program will supply more than $2.4 billion in funding this year.

To transform the program into a vehicle that supports broadband in schools, the FCC this summer issued several new eRate rules. One change that hasn’t gotten a lot of attention so far is the FCC’s move toward a district-wide method of calculating your discount rate.

The sliding-scale discount rate depends on two factors: (1) whether your district is considered urban or rural, and (2) the percentage of your students who are eligible for free or reduced-price lunches, with schools and districts serving a higher percentage of students from low-income families getting a larger discount.

Traditionally, school districts would calculate the discount rate for each of their schools individually and would use each school’s discount rate to determine the amount of eRate funding that school would get for site-based services, such as internal connections. For shared or district-wide services, such as monthly internet access, school systems would calculate a district-wide rate that was weighted per student, per site.

For instance, let’s say your urban school system has three schools and 1,000 total students. School 1 has 200 students, 150 of whom (75%) qualify for free or reduced lunch. School 2 has 300 students, 150 of whom (50%) qualify for free or reduced lunch. School 3 has 500 students, 100 of whom (20%) qualify for free or reduced lunch.

According to eRate discount matrix, the discount rates for Schools 1, 2, and 3 would be 90%, 80%, and 50%, respectively. The district-wide rate for your school system would be 67%, calculated as a weighted average of the discount rates for the three schools {[(90% x 200, or 180) + (80% x 300, or 240) + (50% x 500, or 250)] / 1,000 = .67}.

Not surprisingly, the FCC said many applicants found this building-by-building approach to calculating eRate discounts to be “confusing, time consuming, and fraught with the potential for errors.” It also took longer for the Universal Service Administrative Co. (USAC), the agency that administers the eRate, to review applications.

So, beginning next year, the FCC wants school districts to use a single, district-wide discount rate that would apply to all of their schools. School districts would calculate this percentage in a much simpler way, without figuring a weighted average per school: Take the total number of students across the district who qualify for free or reduced lunch, and divide by the total number of students overall—then consult the discount matrix.

This change has important implications for schools.

(Next page: What these implications are—and another important change you’ll need to know about as well)