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Discount Rate Optimization
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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.
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.
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