The Complex Journey of Cash in the School System
Meet Eric, a 6th grade student in Anytown, USA. It’s 7:30 a.m. on a Tuesday morning — Eric wakes up to the sound of a well-worn alarm clock. School doesn’t start until 9 a.m. but he’s going to be late for the bus. Not the big yellow school bus, but the public bus that loops through fourteen stops before reaching a bus shelter ten minutes away from the schoolhouse.
He hurries down the stairs to grab a frozen breakfast, careful not to wake his sleeping older brother who worked the night shift. Today is a big day — the class is going to the aquarium and Eric has been looking forward to it all month. On the way out, his Mom gives him a hug and digs through her purse, pulling out twelve single dollar bills:
“Make sure to give ten to Mr. Thomas for the trip.”
“What about the other two, ma?”
“Those are for you — get yourself something nice to eat.”
He rushes out the door with the cash in his pocket, excited to finally meet a bottlenose dolphin, an orca whale, and a great white shark. He doesn’t give too much thought to the crumpled bills in his pocket.
What Happens to Cash When it Gets to School?
However, the second they pass hands from him to Mr. Thomas, these bills take on a life of their own. Like many other schools, Eric’s district encourages online payments and his few dollar bills have to travel through a labyrinth of complexities and exchanges.
Mr. Thomas is required to fill out a declaration form, have it signed by his supervisor, provide special advance accommodations, and diligently track the payment in an online form. Otherwise, Eric risks having his academic status put on hold and not being able to participate in other school activities.
Once the form finally arrives at the treasurer’s office, it’s added to a petty cash fund that often offsets other expenses or is distributed across various departments. Eric’s student file most likely has to be manually updated to indicate that he paid for a school trip that occurred over a month ago.
Other Challenges
For many schools, cash poses additional challenges: collection, reconciliation, and reporting. Cash is often much more difficult and easy for young children to misplace, parents to forget, or teachers to not bother with the associated paperwork. The school is also burdened with trying to report these individual payments to their respective states and regulatory bodies. This is an extremely time-intensive process that doesn’t reconcile with standard-use accounting systems and changes year-to-year. Often, cash fees end up completely written off — leaving money, quite literally, on the table.
In response, some schools have simply made cash no longer a payment option. Cashless economies during the COVID-19 pandemic and education’s embracement of digital payment processors have helped fuel a more mainstream shift away from cash.
Meet the Underbanked
Unfortunately, online payments are not a viable solution for millions of American families, including Eric’s parents. For them, cash is the only form of currency that works: it’s how they receive wages, pay for their rent, and cover necessities like groceries and school supplies. Almost 25 percent of American households are underbanked, meaning that they do not possess a bank account and rely on cash for most transactions.
Moreover, a study by the Federal Reserve found that cash is used nationwide for 26 percent of all payments and this statistic hasn’t changed year-over-year. School districts that fail to adopt cash not only lose money but further financial inequality by making payments inaccessible to a significant portion of the population.
Our Solution
Pay Theory solves this problem, bridging the gap between financial inclusivity and school payments. Through a network of SaaS partners, we enable schools to seamlessly collect and reconcile payments in one integrated system at a rate lower than PayPal or Stripe. Just as importantly, our cash tool allows families to pay cash for school fees at a network of national retail partners, and then our system processes, records, and reconciles these payments for the school district.
This means making payments more accessible for families like Eric’s, easier to process for Mr. Thomas, and more profitable for the school — saving hundreds of thousands of dollars in the process.
To learn more about Pay Theory click here.
