HIGH COSTS OF CHILD CARE FOR LOW-INCOME FAMILIES

High prices can make it difficult for low-income families to access reliable childcare, particularly in formal settings. Child care subsidy programs like those funded under the Child Care and Development Fund provide subsidies that cover some or all of the costs of care, with families contributing a copayment. As family income increases, their copayment increases. Once income exceeds a certain limit, which varies by state and family size, families are no longer eligible for subsidized care. State copayment systems vary widely on a number of factors, including minimum and maximum copayments, how copayments increase as family income rises, and the amount paid by families whose income is approaching the subsidy income limit.

The different copayment systems represent different approaches: lower benefits and higher copayments can mean serving more low-income families; providing higher benefits (to keep copayments lower) mean families facing larger increases in out-of-pocket expenses when they no longer qualify for subsidies. In some states, families see only small increases in copayments as their income increases, and copayments are kept relatively low across the life of the subsidy. In these same states, families may see much larger increases in child care expenses when they no longer qualify for subsidies. In other states, copayment amounts increase significantly over the life of the subsidy, and families may qualify for subsidies at higher income levels. In these states, families may struggle with the high copayment amounts while in the assistance program, but they may also be more prepared for the costs they face once they no longer qualify for subsidies.

Source: Urban Institute, 12/23/13, Child Care Aid