With the “One Big Beautiful Bill Act,” Congress passed the first federal school voucher program, creating a new revenue stream for private schools through tax-credit-funded scholarships, Education Week reports.
The program allows individual taxpayers to claim a 100% federal tax credit (up to $1,700) for donations made to scholarship-granting organizations (SGOs). These organizations can use the funds to provide scholarships that help families cover the costs of private school tuition or related educational expenses. The law takes effect for the 2027 tax year and gives states the option to opt in, setting up potential state-level debates over school choice policies.
The federal program mirrors existing state tax-credit scholarship initiatives already in place in 20 states, though the federal version is broader in scope. Eligible students are defined as those from families earning up to 300% of their area’s median gross income, potentially allowing middle-income as well as low-income families to benefit. Unlike many state programs that focus primarily on tuition, the new law permits scholarship funds to be used for other education-related costs, such as tutoring, uniforms, technology, transportation, after-school programs, and services for students with disabilities. However, experts note that in most cases, the funding will not fully cover private school tuition.
Participation by states is optional, and early responses show a political divide. Republican-led states are largely enthusiastic, viewing the federal program as a way to supplement or expand existing school choice initiatives. Some red states that currently lack voucher programs, such as Nevada, South Carolina, and Virginia, may create new ones to take advantage of the federal funds. In states with established programs, the federal tax credits would provide an additional layer of financial support for families choosing private schools.
Democratic-led states have been more cautious, with many governors saying they are still reviewing the program and its potential impacts. Some leaders, like Colorado’s governor, expressed interest in using the funds to support low-income students or potentially public schools, while others criticized the broader federal budget package that included this provision. For example, Maryland officials expressed concern over the bill’s overall negative effects, stating that they would evaluate options to protect student opportunities.
Carter Elliot, a spokesperson for Maryland Gov Wes Moore, called the whole federal budget bill “devastating” and said the state was still determining how “best to mitigate the negative impacts.” “The governor is committed to ensuring that every student in Maryland has the best education possible,” Education Week quoted Mr Elliot as saying. “The Trump administration’s approach on this issue has never been tried before. We are evaluating all of the options to ensure Maryland students have the best opportunities to succeed.”
Experts suggest that while the program could assist families in affording private education, most beneficiaries are likely to be students already enrolled in private schools, based on trends observed in states with similar programs. This raises questions about whether the program will expand school choice for students in struggling public schools or primarily serve as a subsidy for families already paying private school tuition.
Ultimately, the federal voucher program sets the stage for variable state-level implementation, with some states expected to embrace the new funding enthusiastically and others likely to impose restrictions, such as prohibiting funds from being used for religious schools. With 30 states and the District of Columbia already operating some form of private school choice program, the federal tax-credit scholarships could significantly reshape funding flows to private education nationwide once they take effect.
