Federal scholarship tax credit can benefit all students

States are often the first to try new policy ideas. It’s hard to break new ground for 330 million Americans all at once, particularly in politically polarized times. When an experiment works, Congress can draw on lessons learned in the “laboratories of democracy.”

That’s the right way to understand the new Federal Scholarship Tax Credit, or FSTC, which Congress created as part of the One Big Beautiful Bill Act of 2025.

A growing number of states, including Georgia, let parents redirect more K-12 funds to the setting that best fits each child’s needs. In 2025-26 there were 75 private choice programs serving 1.5 million children nationally, according to EdChoice. That’s up from 600,000 students four years earlier. These programs are found in red, blue and purple states: 34 states in all, along with Washington, D.C., and Puerto Rico. (This excludes public choice such as charter schools, magnet schools and open enrollment.)

Private choice has proved popular, especially after parents got an unprecedented look at their children’s virtual classrooms during the COVID-19 pandemic. Federal lawmakers took notice.

Here’s how the FSTC works. Starting in January, Americans can donate to an approved scholarship-granting organization, or SGO. Individuals can claim a dollar-for-dollar tax credit up to $1,700, and married couples up to $3,400. While the donor amounts are capped, the overall program is not — making this a virtually unlimited program.

States must opt into the program for their students to receive funds, and Georgia is one of about 30 states to have done so at this point. But taxpayers may also donate to out-of-state SGOs, so states only limit their students by declining to participate.

The governors of states that have yet to opt into the program tend to cite the same old, false cliches about school choice: that it favors “the rich,” that it harms public schools, that it’s unaccountable, and so on.

The experience in the states undermines these claims.

To qualify, a student must come from a household whose income is no more than three times the area median income. That means most, but not all, students are eligible. But will the money mostly go to wealthier families?

Not if Georgia’s experience is any guide. Georgia’s Qualified Education Expense Tax Credit has been around since 2008, and it does not restrict students based on income. However, our scholarship organizations have long favored lower-income students anyway because they have the greatest need.

In 2025, about 37% of scholarship recipients came from families whose income was less than 125% of the federal poverty level; for a family of four, that’s about $41,000 per year, our analysis shows. Another 32% came from families earning up to twice as much. Only 15% had income over four times the poverty level, which is the traditional cutoff for Obamacare subsidies. What’s more, the lower the income level, the larger the average scholarship amount.

What about students who remain in public schools after others leave for private options? Each year, EdChoice publishes an overview of research into school-choice programs. The vast majority of studies show positive effects even for public schools. For example, 27 of 30 studies of the academic performance of students remaining in public schools found positive effects; only two found negative effects. Similarly positive impacts were found for racial/ethnic integration in schools and for the fiscal effects on public schools.

In any case, the FSTC doesn’t only fund private choice. SGOs may also award money to public school students to pay for tutoring, after-school programs, certain educational therapies and technology, and more.

As for accountability, it’s true that many private choice programs don’t require students to take the same standardized tests as their public school peers. That’s only logical, considering they’re often learning a different curriculum. Many programs, including Georgia’s Promise Scholarship, require recipients to take a norm-referenced test so their parents have an independent assessment of their progress.

But in the end, the greatest accountability is the ability to leave. That’s what these programs offer many families for the very first time. Of note, a recent poll found 70% of teachers support their states opting into the FSTC with just 13% opposing it. Support was slightly higher among public school teachers (72%) than among private school teachers (68%). One could imagine an SGO for public school students supported by Georgia’s 120,000 public school teachers. They could raise hundreds of millions of dollars for the students they serve. The FSTC would ensure they weren’t out a single buck.

Even if teachers pass on participating in the program as donors, the rest of us can support students across our state, in whichever school is right for them.