FACT SHEET: Vice President Harris Announces Action to Lower Child Care Costs for More than 100,000 Families

Vice President Harris is announcing key steps to lower the cost of child care for working families and better support early educators, consistent with the President's historic Executive Order on Care. Today, the Department of Health and Human Services (HHS) finalized a rule strengthening the Child Care & Development Block Grant (CCDBG) program, which supports over a million children and their families each month with child care assistance.

Specifically, this landmark rule will:

• Cap co-payments for families participating in CCDBG to no more than 7% of income, saving families in states that do not yet cap co-payments over $200 a month on average;
• Encourage states to eliminate co-payments entirely for families of children with disabilities, children experiencing homelessness, children in foster care, children in Head Start, and families at or below 150% of the federal poverty level;
• Direct states to pay child care providers more fairly and on time, improving financial stability for 140,000 child care providers and incentivizing more providers to participate in the CCDBG program; and
• Make it easier for families to access CCDBG subsidies by encouraging states to streamline eligibility and enrollment processes and reduce red tape that can disrupt parent employment, training, and education.

Lowering Child Care Costs for Working Families

High child care co-payments strain family budgets, and parents who cannot afford to pay them face a barrier to employment. Working families with low incomes are likely to pay a greater share of their income toward child care costs. The President's Council of Economic Advisers found that higher-income families pay between 6-8% of their income on child care expenses, while families with low incomes pay as much as 31% of their income toward child care. CCDBG provides child care subsidies to low-income working families, yet some families participating in the program may still pay as much as 27% of their income on co-payments. While HHS has long encouraged states set co-payments at or below 7% of income for families participating in CCDBG, only 18 states do.

The final rule will reduce the significant financial strain that high co-payments cause for working families with low incomes by capping co-payments for CCDBG families at no more than 7% of a family's income, consistent with HHS's longstanding recommendation. In North Carolina, a family of 3 earning $44,000 could stand to save close to $110.00 per month. In Pennsylvania, a family of 3 earning $44,000 could save nearly $120.00 per month. In Maine, a family of 3 earning $64,000 could save $160.00 per month. In South Dakota, a family of 3 earning $46,000 could save $180.00 per month. In Wisconsin, a family of 3 earning $68,000 could save as much as $635.00 per month. The final rule also encourages states to waive co-payments entirely for certain categories of families, including children with disabilities.

HHS projects that more than 100,000 families will see their co-payments reduced or eliminated owing to these policies.

Improving Financial Stability of Child Care Providers

Child care providers who serve families receiving CCDBG experience burdens of their own, which disincentivize their participation in the program. For example, only eight states currently pay CCDBG child care providers on-time, meaning only 4% of home-based CCDBG providers and 11% of center-based CCDBG providers are paid on-time. And only half of states pay CCDBG providers based on enrollment as opposed to attendance – meaning thousands of providers payments can be adjusted downward if children miss days.

The final rule requires states to pay CCDBG providers more fairly, which will help stabilize operations for participating providers and encourage more providers to participate in CCDBG. As a result, all home-based and center-based CCDBG providers will start getting paid on-time. Additionally, the final rule ensures that providers are paid based on program enrollment, and encourages states to further increase provider subsidies. These changes will give approximately 140,000 providers needed financial stability and place them in a better position to make needed improvements, such as boosting compensation for workers. These changes will also increase parents' child care options for those participating in CCDBG, making it easier to find the care that meets their needs.

Making it Easier for Families to Access Benefits

Some families currently face barriers in accessing CCDBG because of challenging enrollment processes and paperwork burdens. For instance, in nearly one-third of states, families still use paper applications to access child care assistance.

The final rule pushes states to create and accept applications online for enrollment – extending a policy that already exists in thirty-seven states. The final rule also encourages states to adopt a policy of presumptive eligibility for child care subsidies, which would allow families to receive temporary and immediate financial assistance to pay for child care, while the state determines and verifies their eligibility for the program. This would considerably lower the burden for families to receive subsidy, particularly for families experiencing homelessness. Only six states currently offer presumptive eligibility to families.

The Biden-Harris Administration's Record on Child Care

The finalization of this rule is the latest in a series of actions the Biden-Harris Administration has taken to improve access to early care and education. Since Day One, the President and Vice President have fought to secure the resources and policy improvements necessary to transform our child care system. The President's American Rescue Plan (ARP) not only helped keep over 225,000 child care providers open, but had a significant impact on the economy. That investment alone brought hundreds of thousands of women with young children into the workforce, lowered child care costs per child by $1,250, and increased wages for child care workers by 10%. As ARP funds dry up, the sector urgently needs more support as parents are at serious risk of paying more or losing access to care altogether. This is why the President requested $16 billion in supplemental funding and continues to call on Congress to act to sustain the child care sector. This funding request would support more than 220,000 child care providers across the country that serve a total of more than 10 million kids.

The Biden-Harris Administration has also taken steps to lower child care costs for military families and proposed increased pay for Head Start teachers. In July, the White House hosted a first-of-its-kind convening on child care, gathering nearly 100 state legislators from across the country to discuss ways to improve child care governance, access, affordability, and the workforce. The President and Vice President have also proposed major investments to increase child care worker pay and limit child care costs so that most families pay no more than $10 a day for child care.