How Biden’s American Families Plan Affects Child Care Providers

  • Budget
  • Business

Back in December of 2020, the president signed a new $900 billion COVID relief bill that includes $10 billion to support the child care industry. Now, the Biden administration has proposed the American Families Plan. This bill could mean $1.8 trillion allocated toward child care, education and paid family leave programs. The proposal also includes $225 billion for subsidizing child care costs as well as $800 billion in tax credits and cuts that would benefit families with children. And that directly impacts your business. Here’s what you need to know.

Where will the funds be allocated?

Child care funding

About $225 billion will go toward helping families pay for child care. The bill says that all child care costs will be covered for the lowest-income families, and the rest of funding would be allocated to low-income and middle-income families on a sliding scale to prevent them from having to pay more than 7% of their income on child care for children under five years of age.

Child care centers would receive funding to “cover the true cost of quality early childhood care and education,” which is intended to reach into managing class sizes, developmentally appropriate curriculum and improving classroom environments to be inclusive of children with learning disabilities.

Your teachers and child care workers will also benefit from this plan. Funding is intended to increase the minimum wage of child care providers to $15 — a major improvement from an average hourly rate of $12.24 in 2020. This wage increase would apply to all early childhood staff employed by pre-kindergarten and any Head Start program.

This bill is also pushing Congress to empower and inspire new teachers to enter the workforce in early child care. It’s asking that federal TEACH scholarships double from $4,000 to $8,000 for prospective teachers and expand to include scholarships for students studying to become early childhood educators.

Free, universal preschool

$200 billion of the American Families Plan is slated to go toward free, universal preschool for all three- and four-year-olds, regardless of their families’ incomes. This piece of the bill partners with state governments and focuses on doing a better job preparing children for higher grade level learning as well as minimizing the financial strain child care has added to families over the previous year and a half.

The program would have the potential to benefit as many as 5 million children and save the average-income household $13,000 in child care expenses.

Tax relief for families with kids

According to its website, Biden’s American Rescue Plan stimulus package was meant to not only fund vaccinations, but also to provide immediate, direct relief to families bearing the brunt of the COVID-19 crisis and to support struggling communities. Part of how the plan did that is through tax credits and refunds for qualifying families.

The plan’s child tax credit (CTC) was expanded for one year only once it had lapsed in 2020, continuing to help families through 2021. That extension boosted the CTC to $3,600 for every child under six and to $3,000 for every child six to 17.

Plus, the CTC became fully refundable, so even families in the lowest tax brackets would still be able to receive the full amount. The newly proposed American Families Plan would keep the expanded CTC until 2025, giving families (and child care centers) more opportunities and relief.

The American Rescue Plan also expanded the child and dependent care tax credit (CDCTC) for one year and made it fully refundable as well, which gives families a tax credit for as much as half of the amount they spend on child care with a cap of $4,000 for one child or $8,000 for two children or more. And the biggest piece of all — American Families Plan would make the expanded CDCTC permanent.

What action should child care providers be taking now?

Because the American Families Plan is still in its early stages, it’s likely to be adapted before it’s signed into law. So what should child care providers like you do in the meantime? Here are a few places to start.

1. Contact your local Child Care Resource & Referral (CCR&R ) agency.
They will be your best resource for updates on funding opportunities and will have the most current information on what government funding is available and how to access it. You can find your local CCR&R agency by searching through this form on the Child Care Aware of America website.

2. Write to your representatives.
With policies that can affect your business at this capacity on the line, it’s critical to have the input from child care educators and business owners at the table. Your representatives need to hear your voice loud and clear. You can share your thoughts with your elected officials by visiting NAEYC’s America for Early Ed website to  look up and write to your reps about why they should support early childhood education in every way possible, especially in this bill.

3. Keep an eye on our social channels, this blog, and our newsletter.
We’re keeping a close eye on this bill and how it all shakes out. We’ll be updating this blog as well as our social channels as news about how it will affect child care providers and parents alike. You may want to bookmark this page, or, for more direct updates, sign up for our newsletter to get the latest news delivered to your inbox.

Other questions you might still have about the current relief bill


– Can I use the funds to pay for business expenses like child care software?

Yes, but check with your local/state officials to determine the specific grant guidelines.

– How do I apply for CCDF financial support?

To determine how to apply for CCDF support, contact your state’s child care office. You can also learn more by visiting the federal Office of Child Care’s website.

– Are there other grant or loan programs available to child care businesses?

The relief package also provides $284 billion in loans through the Paycheck Protection Program (PPP) – a program run by the Small Business Administration to help businesses cover the costs of payroll and other operating expenditures*, as well as retain their employees. The program opened Jan. 11, 2021. Some updates to the program include:

  • PPP borrowers can set their loan’s covered period to be any length between 8 and 24 weeks.
  • Loans will now cover additional expenses, including operations expenditures, property damage costs, supplier costs and worker protection expenditures.
  • PPP now provides greater flexibility for seasonal employees.
  • Certain existing PPP borrowers can request to modify their first PPP loan.
  • Certain existing PPP borrowers will be eligible to apply for a second PPP loan beginning Jan. 13. Qualifications for a second loan include having no more than 300 employees and being able to show that revenue declined at least 25% in any quarter in 2020 compared with 2019. Re-applying companies should have also used the full amount of their first loan by the time they receive the second.

*Note that operations expenditures include payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.

We wrote a comprehensive guide on COVID-related financial assistance, including the PPP, here.

Where can I learn more about the new COVID relief package?

You can find the full text of the COVID relief package here. Click here to see a helpful breakdown of the bill’s child care allocations.

About The Author

Francie Dudrey

Francie Dudrey is Director of Content, Events and Brand at Procare Solutions, where she leverages Procare’s brand leadership to support our customers through meaningful content and compelling events. She also has two small children and deeply appreciates the value of high-quality child care.

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