The greatest K12 financial “gamechanger” is not federal cuts to Medicaid nor the current financial freeze, but the latest school choice tax credit scholarship provision added to President Donald Trump’s “One Big Beautiful Bill Act.” In fact, it could mean billions in new money for K12 education.
Georgetown University’s Edunomics Lab predicts the tax credit scholarship provision could ramp up to nearly $28 billion per year in funds for K12 schools.
As part of the provision, the bill creates an individual, dollar-for-dollar tax credit of up to $1,700 per individual taxpayer for contributions to state-approved, federally recognized nonprofits that provide scholarships for eligible children, starting Jan. 1, 2027. There’s also no cap on the total amount of donations, and states are required to opt into the program.
Here’s how the program works:
- To qualify for scholarships, students must come from households earning no more than 300% of their county’s median income and be eligible to attend a public school.
- Eligible expenses include all educational services that are covered by the Coverdell Education Savings Accounts, which requires enrollment at an eligible school. Upon enrollment, eligible expenses include tuition, fees, tutoring, special needs services, transportation and more.
- Scholarship Granting Organizations, or SGOs, responsible for distributing the scholarships must meet a strict set of federal and state standards.
Edunomics Lab Director Marguerite Roza says these SGOs could benefit public school students, too.
“The law is not totally clear,” she says. “But it makes it sound like it doesn’t just have to be a scholarship attending a private school, and that somehow it can be a scholarship for a kid who goes to a district school for specific services.”
If it does happen to result in billions in new money for K12 schools, she says there will be a wave of schools jumping in and using these funds for various student-centered services.
“You might want to pay attention to it and see if there’s something there,” she tells leaders.
Public school enrollment trends
Meanwhile, Roza argues that the shift in private school enrollment has already begun, but may not be as profound as other predictions suggest.
She says schools across the board are likely to face enrollment declines equal to half a percent per year, possibly totalling 3% nationwide in six years.
“That’s pretty significant, actually,” she says. “Some urban districts have felt that before, but we haven’t seen it as much on a wide scale.”
In reality, she believes schools won’t feel the effects of private school vouchers for a couple of years, considering only families who were already considering private schooling will take advantage of the scholarships.
However, organizations like AASA, The School Superintendents Association, worry that the final reconciliation package is a “historic step backwards” in the government’s commitment to supporting American children.
AASA Executive Director David. R. Schuler wrote in a public statement that the national organization strongly opposes the budget bill, underscoring the potentially negative impact private school vouchers might have on public schools.
“Our country cannot afford to fund a secondary private system of education that is able to pick and choose which children they serve; this is a costly mistake that jeopardizes America’s prosperity and sets our public schools back,” Schuler wrote.
Trends for school vouchers
Once seen as a potential great equalizer in K12 education, school choice funds continue to support a substantial number of more affluent and white students already enrolled in a private school, according to the latest report from FutureEd, a Georgetown University think tank.
Among the biggest beneficiaries may be middle-income families, whose earnings are well above the poverty line but have strained to cover private school tuition without an infusion of public funds.
“Analysis of universal private school choice programs in 2024-25 points to the substantial tension between advocates’ goal of expanding families’ private options and the nation’s history of spending public monies primarily on public schools, school reformers’ commitment in recent decades to improving educational opportunities for the nation’s neediest students, and demands for accountability in public spending,” the report’s author, Bella DiMarco, writes.
When Indiana raised its school choice income cap from 300% to 400% of free and reduced price lunch, participation among families earning above $200,000 soared by more than tenfold. Now, those families account for nearly 8% of voucher recipients, FutureEd’s report found.
In North Carolina, the wealthiest families are overrepresented in school choice programs. Those earning above $250,000 account for about 7% of the state’s population but 14% of school choice participants.
Addressing cuts to Medicaid
There’s been widespread concern regarding how the bill’s cuts to Medicaid will impact schools, particularly those in underserved communities.
New America, a left-leaning think tank, published a blog post following the bill’s passage, arguing that it fails America’s students and its education system.
According to the blog post, the cuts to Medicaid would impact nearly 30% of early educators who rely on it for healthcare. Additionally, the think tank states that frequent redeterminations would harm enrollees and burden states, health plans and providers, citing further research.
However, Roza believes much of the media coverage surrounding this issue misses the mark. She says kids simply won’t lose their eligibility, especially those under 14.
“The vast majority of kids in schools are 14 and under, or have a sibling who’s 14 and under, so their parent would not lose their eligibility,” she says. “Also, if the parent loses their eligibility, it does not mean their kid loses their eligibility.”
Sure, there’s the chance that a parent doesn’t fill out the necessary paperwork properly, she adds. But that’s a “what if” scenario, which she says is sending the wrong message to school communities.
“I feel like we’ve misinformed the public on it,” she says. “And parents only lose their eligibility if they don’t do the work requirement. I think that the impact on schools is way overblown.”
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