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Families could save on child care costs thanks to new subsidy rule

Here's how the Biden administration's Child Care and Development Fund (CCDF) final rule will impact child care costs in the months ahead.

Families could save on child care costs thanks to new subsidy rule

Over 12 million families a year are eligible for federal support to reduce child care costs — yet only one out of six actually receive it. To address this long-standing gap, the Biden administration recently announced a new rule to enhance access, affordability and stability in the Child Care and Development Fund (CCDF). The CCDF is the primary federal grant program that allows states to provide child care subsidies (also known as “vouchers” and “contracted slots”) to low-income working families with children under age 13.  

As a result of the final rule, states are now required to:

  • Cap co-payments to no more than 7% of a subsidy-eligible family’s income 
  • Ensure timely and fair payments to providers
  • Simplify enrollment processes
  • Allow flexibility for presumptive eligibility based on enrollment in other benefit programs 
  • Expand child care options for families  

“Eligibility for child care subsidies changes from the federal level to state level immediately, so seeing leadership put standardized rules across all states is great news for the industry overall,” explains Kristie Tubis, an account executive at CareConnect, a software company helping child care resource and referral centers across the country comply with the new rules and digitalize and streamline the application process for families.

Tubis says many states will be able to make these changes quickly, having worked on plans and piloted programs during the pandemic to make child care more affordable and accessible and help providers stay in business. However, the rule doesn’t come with any additional state funding; states must rely on the current structure of their child care funding streams and take the recommended actions to address what many are calling a “child care crisis.”   

Read on to learn what these updates will mean for families and find resources to help you with child care costs where you live.

Who is eligible for child care subsidies? 

The federal government establishes overarching eligibility requirements for child care subsidies based on the following:

  • Child age: Must be younger than 13 years old at the time of application with exceptions for teenagers with disabilities.
  • Family income: Cannot exceed 85% of their state’s median income for a family of the same size.
  • Reason for needing child care: Parent or guardian working, attending job training or attending an educational program, etc.
  • Child citizenship status: Must be a U.S. citizen or a qualified non-citizen.  

While the CCDF rules establish some priorities, such as children from families with very low incomes, children with disabilities and children experiencing homelessness, each state can add additional criteria and choose how they allocate their federal funding across the aforementioned eligibility categories. For example, many states prioritize employed low-income parents over parents who are in education and training. However, each state has different restrictions on the type of degree you can earn while receiving state-funded child care subsidies. 

Case in point: Mustafa Rfat, a doctoral student at Washington University in St. Louis, spent over two months last year fighting to restore his daughters’ child care subsidy only to find out post-graduate study is not an “eligible need” component for its receipt in Missouri. “How in the world can a student pay close to $2,000 for child care a month?” he asks. “It’s really hard to break the cycle of poverty when there are laws that keep you in the cycle of poverty, instead of empowering yourself to gain more skills and earn a better living.”  

“How in the world can a student pay close to $2,000 for child care a month? It’s really hard to break the cycle of poverty when there are laws that keep you in the cycle of poverty, instead of empowering yourself to gain more skills and earn a better living.”  

— Mustafa Rfat, a father and doctoral student in St. Louis

Nationwide, the application process averages a wait time of four plus weeks, according to the U.S. Digital Service. The lengthy, burdensome delay does not accommodate those with critical child care needs, such as families experiencing homelessness and the child care providers themselves. Thankfully, the rule does offer recently clarified flexibilities on eligibility: 

Presumptive eligibility 

Presumptive eligibility uses a family’s enrollment in other public benefit programs like SNAP and Medicaid to verify eligibility. Child care can be provided for up to three months while the state agency works to establish full documentation. The rule’s clarification hopefully creates more awareness of its existence as an option for families needing to start child care assistance right away — so as not to disrupt their work, need to look for work or housing, or education attendance.

The state of Tennessee, for example, recently added “job seekers” to their list of those eligible for CCDF subsidies, according to a March 2024 report published by the United States Government Accountability Office, which details steps states are taking to sustain child care program changes they implemented with COVID-19 funding.

Families experiencing homelessness  

Each year, 2.5 million children — 1 million of them under the age of six — are homeless in America. The new rule allows homeless children to receive CCDF assistance after an initial eligibility determination but before providing required documentation (including documentation related to immunizations). States are also required to use CCDF funds to provide training and technical assistance on identifying and serving homeless children and families.

One example out of New York: Dr. M. Katie Keown, an assistant professor of pediatrics at Columbia University Irving Medical Center and chair for the American Academy of Pediatrics’ Committee on Underserved Children, is currently working in partnership with BronxWorks, a nonprofit organization operating three family shelters in the Bronx, to train their health center staff in positive parenting strategies and how to make referrals to community-based programs that help homeless children thrive. 

“On-site parenting classes are so hard in a transient place like a shelter, but we’re conducting a needs assessment to improve their utilization,” says Keown. “Child care may very well be one of their needs.”  

Tier II shelters in New York must make sure families have access to child care so they can look for work and permanent housing, attend school or attend a training program. BronxWorks’ now provides in-person application assistance for the state’s child care subsidy program, according to a March 2024 amendment made to the state’s child care plan.  

Eligibility for a provider’s own children 

In an effort to reduce staff turnover and improve care quality, some state plans prioritize subsidy eligibility to early childhood education and care staff — including those who work in child care centers (regulated facilities outside a private home) and in family child care (usually provided in a private home). 

Through a current pilot program in Kentucky, providers who care for infants and children under age 4 are eligible for a subsidy for their own children. Other states, including Massachusetts, are piloting similar programs. 

To learn more about eligibility requirements in your state or territory, visit to find your local child care financial assistance program.

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What are the CCDF application changes?  

In most states, the application process for child care subsidies is very complex. Applicants often need to navigate various eligibility criteria, fill out multiple forms and provide extensive proof of their circumstances. However, the new rule encourages states to make changes that would make it easier for parents to navigate and easier to approve and process. (Believe it or not, 17 states still use paper forms.)   

In 2022, the Administration for Children and Families published guidance to help states and territories administering CCDF identify and adopt best practices for applications and eligibility processing including, according to the press release, the elimination of non-essential enrollment requirements.

Fast forward to today. New Mexico now offers a five-step eligibility screener with results showing all benefit programs that you might be eligible for with links to their applications. 

“States that make investments in technology upgrades see workforce development, quality improvement and an increased supply of child care slots,” says Tubis, who recently worked with the Long Beach Early Learning Hub (Hub) in California to launch one universal online application (in English, Spanish, and Chinese) for parents to: 

  • Find live availability for child care
  • Apply for CCDF
  • Apply for Head Start
  • Apply for employer-sponsored subsidy matching
  • Find other resources and referral programs in their city

“You have to understand where busy parents are coming from, and I like to think of it [the universal application] as a one-stop-shop,” says Tubis. “I really hope it helps parents identify programs like CCDF that they might be eligible for but not aware of.” 

“States that make investments in technology upgrades see workforce development, quality improvement and an increased supply of child care slots.”

— Kristie Tubis, an account executive at CareConnect

How does the new rule reduce child care costs? 

The new rule puts a limit on the copayment an eligible family would need to pay a provider at no more than 7% of their total household income — reportedly saving families in states without a cap an average of $200 per month.  

During a July 2023 press call, Vice President Kamala Harris noted about 80,000 families would pay less for child care because of the new cap. She offered the example of a family in Montana making $46,000 a year, explaining that they could save about $80 every month or almost over $1,000 a year.

The rule also encourages states to eliminate copayments for:

  • Eligible families at or below 150% of the Federal poverty level
  • Children with disabilities
  • Children experiencing homelessness 
  • Children in foster care
  • Children in Head Start

Twenty years ago, when her daughter was young, Michelle Thomas remembers writing a check to her child care center every Friday for the following week — whether she attended every day or not. At that time, she was the Director of the State of Indiana Bureau of Child Care and, to her frustration, she says implementing a parity like the recent rule was a “non-starter conversation back then.” That said, she’s thrilled to see the new rule strives to make child care more affordable for families.

How does the new CCDF rule affect families’ child care choices?

For a family to be eligible, they first must find a child care provider in their area who accepts the subsidy and have that provider lined up and selected on the application. This is an aspect of the plan that Tubis describes as “putting the cart before the horse.”

States may contract with child care providers to serve children eligible for CCDF, but it is more common for families to receive a certificate (or voucher) for the provider of their choice. 2020 data from the Congressional Resource Office shows 94% of children used certificates.

Many child care centers and in-home providers have been averse to accepting children with subsidies because of the lag in pay, but the new rule changes have an advanced payment model. In other words, providers participating in CCDF will now be paid prospectively based on enrollment rather than attendance and that change could ensure they’ll be paid on time and for the actual cost of care — making it easier for them to budget and hopefully incentivizing more providers to join the program. 

If you or someone you know is a child care provider interested in learning more about the requirements for accepting CCDF in your state, contact your state’s licensing agency.

The bottom line on the new CCDF rule

As it’s currently designed, the child care subsidy system in this country is likely only serving those who know about its availability, those who are eligible and those who know how to apply.

As a result of the new CCDF rule, each state must determine how they can improve outreach to eligible families and decrease the complexity of the program application. 

Tubis, a mother of two young children herself, hopes states will begin discussing how they can secure additional funding to expand eligibility to reach more families with low to middle incomes. After all,’s 2024 Cost of Care Survey found 60% of families are spending 20% or more of their annual household income on child care — much higher than the rule’s 7% cap for  subsidy-eligible families. 

As all states undergo a process to shape their 2025-2027 CCDF plans, now is the opportunity to speak about your child care experiences as a parent or a provider, spotlight current system challenges and make recommendations for the future. Check Child Care Aware of America’s 2024: State CCDF Plans Hearing Tracker to stay up-to-date on your state’s CCDF plan process, and learn how you can help advocate for change.