A new federal school choice program set to launch next year could become one of the largest sources of K-12 funding in the nation, potentially rivaling the combined funding of Title I and the Individuals with Disabilities Education Act. The program, created through the One Big Beautiful Bill Act, allows eligible taxpayers to donate up to $1,700 to scholarship-granting organizations and receive a dollar-for-dollar tax credit.
The American Federation for Children, a school choice advocacy group, estimates that if the program incentivizes 1 in 5 eligible taxpayers to contribute, it would raise $37.6 billion. This sum is comparable to the combined funding of Title I and IDEA, the U.S. Department of Education’s two largest funding streams for schools.
Program Details
Nearly three-quarters of taxpayers will be eligible to participate in the program next year, according to the American Federation for Children. They note that the program allows scholarship-granting organizations to award funds to public, private, and home-school students to spend on eligible expenses such as tuition, tutoring, and books.
The federal tax-credit scholarship program does not face the same constraints as state tax-credit scholarships, which have caps on how much a scholarship-granting organization can raise in a year. Additionally, the federal program allows corporations to give, and scholarships can be used for a variety of expenses beyond private school tuition.
Participation and Funding
If 5% of eligible taxpayers donate, the program will still generate $9.4 billion annually for scholarships, according to the analysis. Currently, about 1% to 3% of eligible taxpayers participate in similarly styled state-level programs, with 3% typically donating in states with mature and well-established tax-credit scholarship programs.
It is estimated that 121.5 million taxpayers will ultimately be eligible to donate and receive tax credits, with 100 million filers eligible to donate the full $1,700 and receive the maximum credit under the law.
Patrick Graff, a senior fellow with the American Federation for Children, conducted the analysis and said that if scholarship-granting organizations prioritize students from low-income families and those with disabilities, much of the money could flow to the most disadvantaged students.
Challenges and Barriers
Awareness and administrative burden are potential challenges for the program, said Josh Cowen, a professor of education policy at the University of Michigan. The report proposes an avenue to make it easier for taxpayers who may struggle to give $1,700 in a lump sum to still participate by reducing their federal withholding from their paycheck and making biweekly donations.
Most Democratic governors have yet to opt their states into the program, citing distrust of the Trump administration and concerns about the program’s merits. However, because taxpayers can donate to scholarship-granting organizations anywhere in the country and receive the tax credit, Democratic governors may not want to see potential money going to students in other states.
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As the program’s regulations are expected to be proposed by the end of September, more governors may sign on once they see the details. The Treasury Department will play a significant role in shaping the program’s implementation and addressing potential barriers to growth.
The program’s success will depend on its ability to address these challenges and ensure that the funds are used effectively to support disadvantaged students.
The American Federation for Children will continue to monitor the program’s progress and provide updates on its implementation.
According to Patrick Graff, the program has the potential to make a significant impact on the education system, and it is essential to ensure that it is implemented correctly.
The University of Michigan will also be monitoring the program’s progress and providing analysis on its effectiveness.
The program’s impact will be closely watched by educators, policymakers, and taxpayers, and its success will depend on its ability to provide meaningful support to disadvantaged students.
Furthermore, the program’s ability to allow scholarships to be used for a variety of expenses beyond private school tuition, such as tutoring and books, could provide more flexibility for students and families, and potentially increase participation rates. Additionally, the fact that corporations are allowed to give in the federal program could attract more donors and increase the overall amount of funding available for scholarships.
The Treasury Department‘s role in shaping the program’s implementation will be key, as they will need to balance the need for clear guidelines and regulations with the need for flexibility and adaptability in the program’s implementation. The department will also need to ensure that the program is administered in a way that is fair and equitable, and that the benefits of the program are available to all eligible taxpayers.
