The vast majority of the nation’s students could qualify for scholarship awards under the new federal school choice tax credit program launching next year—with almost 92% of the nation’s K-12 students potentially eligible.
That’s according to a new analysis from a school choice advocacy group that shows how expansive the federal tax credit scholarship program could be.
But the number of children ultimately eligible for the awards and who ultimately receive them will depend on how several factors play out as this new program—the federal government’s first major foray into school choice—evolves. Those factors include how many states sign up, how many taxpayers use the tax credit, how many students seek scholarships, and how many are given out. Finally, the Trump administration is still developing regulations for the program, and their specifics could also shape participation.
The analysis from the American Federation for Children, released this week, comes as 19 states mainly led by Democratic governors have yet to decide whether they’ll participate. Those governors are facing pressure from proponents to opt in soon and from opponents, including teachers’ unions, to decline to participate.
Under the new program, created by last year’s One Big Beautiful Bill Act, taxpayers can claim dollar-for-dollar federal tax credits of up to $1,700 in exchange for donations to organizations that award scholarships to cover K-12 expenses including private school tuition, home-school costs in certain states, and some services for students attending public schools—including tutoring, before- and after-school programs, technology, and uniforms.
Scholarship-granting organizations, or SGOs, can only award scholarships in states that opt in.
In addition, student recipients can’t come from families earning more than 300% of the local median income. But that’s a generous threshold—as high as $616,500 in Santa Clara County, Calif., and as low as $107,100 in Oglala Lakota County, S.D., according to an analysis from EdChoice, an advocacy group. That high cutoff is primarily responsible for the high number of potentially eligible students.
With more than 90% of students potentially eligible, here’s a look at four key factors that could determine how many qualify in the end and how many students actually receive scholarships.
1. How many states will opt in?
To date, 31 states have either formally opted in to the program or have signaled they will, according to Education Week tracking. Those states are home to 30.9 million K-12 students who will be eligible for scholarships, according to the American Federation for Children analysis.
Those students represent 60% of the 51.7 million students who could become eligible if all states and the District of Columbia opted in.
The vast majority of students in any state that participates would qualify for a scholarship under the program’s rules, with 96% potentially eligible in Maine on the high end and, on the other end, 86% eligible in the District of Columbia, according to the AFC analysis, which used U.S. Census data to determine each state’s K-12 and home-school population and income distribution. Regional income eligibility thresholds are based on U.S. Department of Housing and Urban Development data.
However, it’s unlikely every state will participate next year. So far, the Democratic governors of Minnesota, Oregon, and Wisconsin have said they’re not signing up. Most other Democratic governors say they’re awaiting the Trump administration’s proposed regulations on the program, which are expected this fall.
And the number of states participating could vary slightly each year, as governors have to opt in annually.
In Colorado, for example, Gov. Jared Polis last year emerged as one of the few Democratic champions of the policy, and he’s since opted his state in for 2027. But he leaves office early next year, and the Democrat running to replace him, Attorney General Phil Weiser, has said he’s a “firm no,” raising the possibility the Democratic-leaning state could withdraw.
Tommy Schultz, the American Federation for Children CEO, said the numbers of potentially eligible students show what’s at stake as governors decide whether to participate.
“For governors and states who have taken swift action to opt in, thank you, and for governors still considering opting in, what are you waiting for?” he said in a statement accompanying the new analysis.
2. How many taxpayers will contribute to SGOs, and how much money?
One of the big unknowns about the tax-credit scholarship program is how many taxpayers will claim the credit, since that will determine how much money scholarship-granting organizations will raise.
There’s no cap on the number of taxpayers who could claim it, and no cap on the total value of tax credits the federal government could bankroll. (Whereas taxpayers can claim a deduction for most charitable contributions, lowering their taxable income, the scholarship tax credit allows taxpayers to take $1,700 directly off their tax bill.)
Congressional scorekeepers have estimated the federal government will issue $500 million in credits next year as the program gets off the ground. By 2034, they project $4.4 billion will come out of what taxpayers owe to the federal government and flow instead to scholarship-granting organizations.
But others have projected the program could grow even larger.
One factor affecting the number of students who ultimately receive scholarships is the success of efforts to persuade potential donors to contribute to SGOs and claim the tax credit. Awareness of the new program is limited, and it could be costly to market the credit to potential donors.
3. What kinds of SGOs will form to accept taxpayers’ contributions?
Another factor affecting how many students ultimately collect scholarships is the number of SGOs that emerge and their missions. The law is silent on the size of scholarship awards, and the U.S. Department of the Treasury says states won’t be allowed to set their own rules for SGOs beyond what’s outlined in federal law.
An SGO focused on granting scholarships to cover private school tuition may support a different number of students than one focused on supporting public school students’ access to after-school programs.
It’s also unknown how aggressively public schools will position themselves to take advantage of scholarship money. Some school districts are already preparing. The Gwinnett County, Ga., schools, for example, plan to pitch the credit as an incentive to donate to its foundation, which already gives out student scholarships.
Some have called on Democratic governors to opt their states in because of the law’s potential to fund some public school expenses, but teachers’ unions have remained opposed.
“I expect that public school kids are going to get crumbs, and the biggest winners are going to be those that are trying to privatize public education,” Melinda Person, president of New York State United Teachers, told Education Week in June. “The question isn’t just about this year’s dollars and what we can get for public school kids this year. It’s about whether we’re helping to entrench a policy that we believe is ultimately going to weaken public education.”
4. Will home-school students be counted as students of schools?
In recent years, a number of states have enacted policies that make home-school students eligible for public funds as part of a larger expansion of private school choice programs. But the federal tax-credit scholarship program doesn’t appear to do that automatically.
The law that spells out the expenses that tax-credit scholarships can cover says they must be “incurred in connection with the enrollment or attendance ... at a public, private, or religious school.”
So, are home-school students considered students at schools?
The Treasury Department, which is developing regulations for the program, said last month that it expects to treat home-school students as students of schools if state laws treat them that way.
Twenty-two states define home schooling as a form of private or religious school, according to AFC. That means home-school students in the other 28 states and the District of Columbia wouldn’t be eligible under the Treasury Department’s current plan for program rules.
In AFC’s analysis, that removes almost 800,000 home-school students who would meet the scholarship law’s income threshold from the pool of potentially eligible students.
