A common rationale for providing free lunch for all students is that selectively receiving a free meal at school generates stigma. This study examines the hypothesis that eligibility to receive a school free lunch has negative effects on student educational outcomes, and that this stigma-effect is more severe in schools where a low proportion of students receives a free lunch at school. To do so, we use a sparse optimal matching method within a multilevel growth framework. Our results reveal that free school lunch status does not have significant net impact on students’ average educational achievements or growth rate during middle school. Educational achievement in middle school is, however, significantly affected by the interaction between school free lunch status and the proportion of students in the school receiving a free school lunch, with students experiencing a stigma effect in schools with a low proportion of free lunch students.