The 30% Rule states that if 30 percent or more of the products or services included in a single FRN are ineligible for E-Rate funding, USAC will deny that entire funding request. Applicants are expected to subtract ineligible costs from an FRN up front rather than let USAC find them during review.
How It Works
Every FRN should contain only eligible products and services. When a request includes both eligible and ineligible components, the applicant must subtract the ineligible costs before filing. If USAC finds ineligible items in an FRN during application review, it contacts the applicant to determine the exact cost associated with them.
At that point, the applicant can ask USAC to either remove the ineligible items from the existing FRN, or, if there's a genuine disagreement about whether something is eligible, create a new FRN and move the disputed items there. If the applicant doesn't respond and USAC can determine the ineligible cost on its own, USAC removes those items and keeps processing the rest of the request. If USAC can't determine the ineligible cost, it denies the entire funding request (USAC: The 30% Rule).
The rule applies at the individual FRN level, not across an entire PIA review or the whole Form 471 application.
What This Means for You
Applicants
Check the current-year Eligible Services List line by line before filing, and never let a vendor bundle ineligible extras into the same FRN as eligible products. A clean split into separate FRNs up front is far cheaper than a mid-review correction, and it removes any risk of an outright denial.
Service Providers
When quoting a bundle that mixes eligible and ineligible items, itemize the cost of each component clearly. An unclear or bundled quote makes it harder for the applicant to separate ineligible costs before filing, which puts their FRN at risk.
The FRNs that trip the 30% Rule usually aren't ones where the applicant knowingly requested something ineligible. More often, a vendor bundled a small amount of "extras" into a quote, an accessory, a warranty upsell, a service the applicant didn't specifically ask for, without flagging that it wasn't eligible, and that quiet addition is what tips an otherwise clean FRN over the threshold.
Common Questions About the 30% Rule
What happens if my FRN is 30% or more ineligible?
The entire funding request is denied, not just the ineligible portion.
Can I fix an FRN that's over the 30% threshold?
Yes, if it's caught during review, you can ask USAC to remove the ineligible items or move the disputed items to a new FRN.
What if I don't respond to USAC about ineligible items?
If USAC can determine the ineligible cost itself, it removes those items and continues processing the rest of the request. If it can't, it denies the whole FRN.
Does the 30% Rule apply per application or per FRN?
Per FRN. Each funding request is evaluated on its own ineligible-cost percentage, not the whole Form 471.
How do I avoid triggering this rule?
Separate eligible and ineligible costs before filing, and don't bundle ineligible components into the same FRN as eligible ones.
Informational only, not legal advice. E-Rate procedures and forms can change by funding year. Confirm current requirements in the applicable USAC and FCC guidance.