Updated: President Donald Trump signed the tax break legislation, which includes the private school choice program described in this article, into law on July 4.
The first major federal program that would direct public funds to private school tuition is one part of the major budget bill that narrowly passed the U.S. Senate this week.
But the tax credit-fueled policy looks different than it did in earlier versions of the bill after an administrative hurdle dealt it a temporary setback last week.
The fundamental structure of the provision remained the same as the version in the tax cuts and spending bill passed by Republicans in the U.S. House of Representatives in May: Individual taxpayers will be eligible for tax credits for donations they make to organizations that award scholarships so K-12 students can attend private schools. But the Senate version removed the cap the government would spend on the program, and would make it a permanent feature of the tax law, creating an open-ended proposal with an uncertain—but potentially high—cost.
The Senate version makes the size of the individual tax credits smaller, though it matches reimbursements for donations to scholarship-granting groups at 100%, unlike any other tax credit, experts say.
It also requires that states opt into the program—potentially setting up a new round of state-level, political battles over private school choice.
While the legislation has passed both chambers of Congress, it now returns to the House for further votes before it can head to President Donald Trump’s desk. As a result, the tax-credit scholarship provision could still change.
“No child should be trapped in a failing school,” Sen. Bill Cassidy, R-La., said in a post on X following the bill’s passage. “This is the FIRST federal school choice program in AMERICAN HISTORY, and it will finally give parents the freedom to choose the best education for their children.”
Cassidy, who chairs the Senate’s Health, Education, Labor, and Pensions committee, proposed a tax-credit scholarship bill as standalone legislation before senators incorporated it into the larger budget package.
School choice advocacy groups cheered the provision’s inclusion in the budget bill while it drew sharp criticism from the nation’s largest teachers’ unions, whose leaders argued the scholarships would benefit children already enrolled in private school—as data have shown that the majority of students using a number of state-level private school choice programs weren’t leaving public schools.
“The senators who voted for this bill are turning their backs on those who need their support the most,” National Education Association President Becky Pringle said in a statement. “This bill will devastate our schools and communities—all to finance massive tax breaks for the ultra-wealthy.”
Who’s eligible for the Senate’s tax-credit scholarship?
Under the proposed tax-credit scholarship, which would begin in January 2027, students whose families’ income does not exceed 300% of their area’s median gross income—a broad pool of potential recipients—are eligible to receive scholarship funds from scholarship-granting organizations.
The bill doesn’t stipulate how much money they could receive to pay for private or religious school tuition, tutoring, or books, but it could supplement the assistance they receive in states with existing programs that let families use public funds for private education.
Taxpayers who donate to the groups that give out tuition vouchers would receive federal tax credits worth up to $1,700.
States, through the governor or another official, would have to opt in to the provision. If they decide to, states would be charged with vetting the scholarship-granting organizations that receive the donations and distribute the scholarships.
The version of the bill that passed the House capped the government’s total tax credit payouts at $5 billion, but the Senate’s iteration has no ceiling.
The Senate version is much larger in scope than earlier versions, said Patrick J. Wolf, a professor of education policy at the University of Arkansas.
“I suspect some of these blue and purple states will participate and take the free federal money, and that would mean an expansion, a geographic expansion, of access to private school choice,” Wolf said.
Currently, 30 states and the District of Columbia have at least one private school choice program, according to an Education Week analysis. There’s been particular momentum in recent years to Republican-led states to expand existing programs and pass expansive new ones for which all students are eligible.
Despite its large size, this version comes with concessions, said Josh Cowen, a professor of education policy at Michigan State University.
It gives authority to states to decline to participate entirely. If they decide to participate, this version allows them more regulatory oversight, Cowen said in an email, an indication that Republicans “had to give up a lot to keep this in reconciliation.”
“A major reason the voucher lobby wanted this is to force vouchers into states that don’t have them,” he said. “The current bill would (again, for now) not do that so long as a state’s educational decisionmakers (governors, state superintendents, etc.) didn’t want it.”
The House will either “concur” with the Senate’s bill—sending it straight to Trump—or the two chambers will convene a conference committee to hash out their differences.
Still, it’s likely the policy will survive conference, Wolf said, though its parameters could change.
How much could it cost?
With no cap on the number of tax credits that could be issued, an Institute on Taxation and Economic Policy analysis of the bill estimates that 138 million taxpayers would be eligible to claim one in exchange for a donation to a scholarship group. But it’s unlikely it would hit that number “because of the paperwork involved and, more fundamentally, because private school vouchers are unpopular with the public,” Carl Davis, the group’s research director, wrote in the analysis.
Still, if a more modest, but still significant, 59 million people claimed the tax credit, it would cost the federal government up to $101 billion per year. If around 5 million donated $1,700 each to scholarship-granting organizations, the total cost would be more than $8 billion per year.
For context, the U.S. Department of Education, which is facing a 15% cut under Trump’s proposed budget for 2026, has spent around $80 billion annually in recent years. Its two largest funding streams for K-12 schools are Title I-A for students from low-income households ($18.4 billion) and the Individuals with Disabilities Education Act, Part B, for students with disabilities ($14.2 billion).
For taxpayers claiming the credit, it’s a full reimbursement for their contribution, something that is unprecedented in the federal tax code, Davis said. Other tax credits offer partial reimbursements.
“Any other charity would be over the moon for a chance to have a tax incentive of this size,” Davis said in an interview. “It’s really a startling shift in federal policy in that way.”
If there’s a high take-up rate, it could be one of the largest tax cuts in the whole bill, he said. On the other hand, if Americans don’t want to fill out the paperwork to claim the credit, it could end up having a low cost.
“It’s partly a referendum on how the American public feels about vouchers. Do they care enough about them to bother to contribute ... even when the government says it’s going to reimburse 100% of the contribution?” he said.
“And it’s partly a test of how effective the private schools and groups that promote private schools are in encouraging people to participate in this program, to make the contribution and then claim the offsetting credit.”
Could publicly funded, private school choice be an option everywhere?
Early in his second term, Trump signed an order telling federal agencies to do what they could to expand school choice within existing programs and budgets. He also threw his weight behind Texas’ recent school choice legislation—which created the largest private school choice program yet.
The national provision, however, moves the whole country closer than it has ever been to a nationwide private school choice program.
Robert Enlow, president and CEO of the school choice advocacy organization EdChoice, called it a “major milestone.”
“This is a lifeline for families in states that have yet to act on school choice,” he said in a statement.
Wolf, from the University of Arkansas, has his eye on Illinois and Pennsylvania as states that could opt in, as the Democratic governors there have shown some openness to private school choice.
“I think Pennsylvania is highly likely to participate. Illinois, maybe, is a toss up,” Wolf said.
Cowen expects litigation if the choice provision passes as-is—particularly from religious groups, which could face more government oversight of their schools if they accept students funded through this federal program.
“The immediate impact will be to add potentially more voucher funding to states that have already passed vouchers. And it will do little to force vouchers today into states that don’t want them,” he wrote. “But it DOES have the architecture and structure of a plan to force states to accept such funds in the future, either through litigation or legislation or both.”
