by Josh Cowen

Publisher’s Note by Todd Truitt

As Virginians await Governor Abigail Spanberger’s decision regarding continued participation in the new federal scholarship tax credit program—originally opted into by former Governor Glenn Youngkin in early 2026—Josh Cowen’s Q&A below offers an overview of how the program functions. Cowen, a longtime critic of traditional private school vouchers, notes that this federal initiative does not draw funds from local public education budgets or state resources. Instead, it operates through federal tax credits for donations to scholarship-granting organizations (SGOs), which can direct resources toward tutoring, afterschool programs, enrichment activities, and other supports for public school families and districts.

This federal program connects to the issues discussed in our earlier reporting on the interplay with it and Virginia’s Education Improvement Scholarships Tax Credits (EISTC) program, which is scheduled to sunset after 2027. The federal approach provides an option for supporting families up to 300% of local median income without using state funds directly.

Also relevant to Virginia communities is that Cowen emphasizes that local school districts and communities can begin preparing now by exploring partnerships with existing 501(c)(3) organizations—such as district foundations or community foundations—to serve as SGOs. He outlines potential models for offering enhanced services like fee-based afterschool programming, tutoring, or enrichment activities that eligible public school families could access via scholarships. These steps could allow public districts to generate additional revenue streams.

Josh Cowen: Public school families and public school districts can benefit from a new national program, and it’s important to explain how.

Last spring, during my testimony to the Texas legislature, Rep. James Talarico asked me what changes should be made to the state’s looming school voucher scheme to make it work better for kids and families. We both knew the bill was likely to pass (it did), and that it would replicate many of the mistakes that similar legislation had made over the past four years.

The spirit behind James’s question is a controversial one in public school advocacy circles.

The idea is that if we explain how to make these bills better, we give a permission structure to right-wing groups to push something that’s fundamentally at odds with our values and priorities.

And there’s concern among some progressive advocates that offering legal remedy to vouchers would give judges an off-ramp away from declaring them unconstitutional.

But the flip side of that is that in red states like Texas—and in purple states across the country—progressives have to partner with conservatives and with moderates to actually get anything done.

I am a school voucher critic. I literally wrote the book on vouchers. Many of the talking points about vouchers used by progressives over the last four years were written by me, especially these three:

1.) The fact that with vouchers it’s “the school’s choice” not school choice.

2.) The fact that vouchers fund kids mostly in private school.

3.) Vouchers have caused some of the worst academic declines on record—on par with what COVID-19 or Hurricane Katrina did to test score.

All of the criticisms I’ve raised about school vouchers still hold.

But that’s exactly why it’s important to squeeze every dollar out of the new federal scholarship tax credit for public school families. Like school vouchers, the federal program subsidizes private tuition. But unlike vouchers, it does so without threatening state education budgets, and public school families can use it too.

So in the spirit of James Talarico’s question to me back in March 2025, let me take on some new questions about the federal scholarship tax credit.

How does the new federal scholarship tax credit differ from earlier proposals?

I strongly opposed the initially proposed version of the federal scholarship: a standalone bill known as the Educational Choice for Children Act (ECCA), which Betsy DeVos and other allies had been pushing in Congress for years to no avail.

When Republicans included ECCA in the budget reconciliation process that gave us the One Big Beautiful Bill Act, they had to make major changes to the scholarship tax credit. Among these were stripping out major elements of a tax shelter designed for the wealthiest donors: the ability to donate against capital gains liabilities that also affected state revenue.

The law that passed also clarifies that public school students are eligible to use the scholarship, and is much clearer than previously proposed versions that public schools can be providers of educational services that are fundable under the program.

To my dismay, some progressive activist groups still circulate the old, far worse version of the bill—the one that didn’t pass—in their lobbying against the program today. That does an enormous disservice to public school leaders trying to navigate a complicated space.

So how does the tax credit actually work?

Under the version that actually did pass, families can donate up to $1,700 (or roughly $65 per paycheck) to a scholarship granting organization (SGO), and get all of that money back against what they owe at tax time. SGOs can then bundle that money and distribute scholarships for things like tuition, tutoring, afterschool, and other expenses.

Families are eligible to receive those scholarships if they earn less than 300% of their local area median income. That’s about 90% of Americans.

The afterschool, tutoring, and other educational expenses are those that will be available for public school students to use, and for public school districts to offer.

What are those SGOs anyway?

They must be 501(c)(3) non-profits, distributing funds to more than 10 students served by at least two providers. They have to use 90% of revenue for scholarships. But that means they can hold up to 10% for the cost of running the SGOs.

I expect this in practice to mean non-profits interested in scholarship distribution will set up federal accounts to track revenue and expenditures and ensure compliance with the law.

The SGOs can be educational (e.g. tutoring, afterschool), sector-based (e.g. public school or private, or both), mission-driven (e.g. church-based or devoted to children with special needs), or really any of the above.

What’s all this about “opt in” and “opt out?”

The catch in the new law is that governors have to “opt in.” And there has been no shortage of news coverage of the “will they or won’t they?” intrigue. But 31 governors have already done so, and I expect the rest follow by 2028.

The reason is that all adults are already “opted in” to the tax credit no matter where you live. All of us can donate to a SGO—for private tuition, supporting public school kids, supporting literacy, you name it, someone will probably create it. And you’ll want to do it to help offset what you owe Uncle Sam at tax time.

Sure, in this Trump economy, not everyone has $65 per paycheck laying around to think ahead for tax season. But millions of middle class families use tax vehicles like this all the time. And the firm $1,700 cap is much more clearly targeted to middle class donors than the version Betsy DeVos wanted (a cap of $5000 or 10% of gross income, including capital gains).

Here’s the thing. If your governor “opts out,” that means you’ll have to find an SGO out of state to donate to, and you’ll be able to do that easily enough from various websites cataloging the options. Even Turbo Tax will have a drop down menu to search.

This effectively creates a financial penalty to states that opt out. To claim the credit, adults in those states will have to send their donations to SGOs serving children in other states.

So unless the law is repealed, most governors will eventually opt into the program to prevent the flow of tax donations into neighboring states.

What are we waiting to hear from the U.S. Treasury?

We are still waiting for the U.S. Treasury to release its first round of regulations about the program. Such rule-making is normal for many federal and state laws after passage.

In this case, it’ll include some general framework for what qualified educational expenses will be.

I expect these to come very soon. On Tuesday of this week (June 9th), Treasury will actually give some sort of preview. In any case, the eventual rules will determine:

• Whether the $1,700 cap on giving is limited to households or individuals, regardless of marital filing status. I expect Treasury to say a married couple filing jointly can donate $3,400 to receive the 1-1 credit.
• What counts as revenue for SGOs. Because 90% of all funds must be spent on scholarships, defining which SGO resources fall under the definition of revenue is of critical importance. For example, Treasury must determine whether philanthropy or large-dollar donors could provide seed resources to an SGO—beyond what is matched 1-1 in a tax credit—to create or maintain the organization.
• The extent to which states will be able monitor and oversee educational outcomes, discriminatory behavior, and other quality and equity control concerns. I do not expect states to have much flexibility to turn either private or public sector-focused SGOs away as long as they meet minimum requirements under the law.
• “Required v. provided” expenses. This will affect what suite of services districts can actually offer to families for reimbursement from the scholarship.

It’s important to know that as regulations, these Treasury rules can change over time without the law itself changing. If Democrats take the presidency and Congress in 2028, I expect the law to be revised and the new Treasury Department to issue revised regulations.

Can public school districts raise revenue under the new scholarship?

Yes. Even under the most narrow interpretation of the law, school districts can provide services that students may purchase in addition to their state-funded base funding that comes with enrollment.

Public schools are included in the law as eligible providers.

Public school districts can use the dollars as a revenue stream. The only question right now is: how much?

Education Secretary Linda McMahon has herself underscored the public school component to this program in repeated appearances. Believe me, I get the hesitation to trust anything coming out of the Trump administration, but in this case it’s also in statute.

Won’t this drain money from public schools?

There will be more competition for students over time. But as a direct funding matter, I have always been very clear in my writing that the portion of funding threatened by school vouchers is the state share of public school spending.

That funding is untouched by the federal credit.

Public school students need not leave public schools to use these dollars—something that’s very different from state voucher schemes. As far as vouchers go, most voucher users were already in private school.

That’s actually an argument for why public schools need to hustle to make use of the scholarship tax credit. The fewer public school districts use the program to provide new services and raise new revenue, the more like a garden-variety voucher this thing becomes.

So what can public schools actually do?

Many districts already partner with a local district or community foundation which, as a 501(c)(3), will be eligible to become an SGO.

The question is whether districts can offer very limited services such as before or afterschool programming, or whether a full suite of enhanced education opportunities like bundles of field trips, tutoring, enrichment activities are offered for a fee. For kids eligible under the program—up to 300% of local median income, or basically 9/10 of all Americans—the local SGOs could cover those costs.

There are at least three potential models here:

• Model 1: districts could create a set of new programming for certain students based, for example, on academic or other needs. For example, a district could partner with an SGO for Title I students, fee-for-service electives or clubs, literacy tutoring, or the like.
• Model 2: districts could create programs for all children, under that suite of enhanced education opportunities I described above. Here, districts could set fees for bundled services, partnering with SGOs to give every eligible student scholarships to receive any services not required by the state’s minimum services for public schoolers. Families above the scholarship’s income-eligibility threshold (300% of local area median income) would pay for these services.
• Model 3: community-based SGOs wrapping districts, private, and homeschoolers into bundled services like afterschool or tutoring programming. This could become especially common in rural communities.

What’s the range of realistic outcomes here?

So the range here for districts runs from potentially a one small portion of revenue for a few extra services, to a major new revenue stream that, for example, the Edunomics team at Georgetown University estimates could be as much as $1000 extra per pupil.

I’m not sure that I agree with that higher-end estimate yet. But I do agree there is revenue—and potentially substantial revenue—available to school districts. And in any case, I believe the federal tax credit is going to represent a bigger and bigger share of federal K-12 funding over the next few years.

So districts will want to work toward those revenue streams just to grab those federal dollars.

What’s the worst case scenario?

The worst case scenario is that some state governors basically refuse to follow the federal law, and refuse to approve SGOs that serve public schools.

This would almost immediately trigger litigation, and I would expect public school communities to win that litigation. But the possibility that, say, Ron DeSantis just decides to ignore federal law is real in the Trump era.

Why do some people say public schools can’t use this money?

Three reasons.

First, we are legitimately waiting for Treasury to see what kinds of services public schools can provide. Generally speaking, we don’t expect services required by state law to be fundable under the federal program. I expect to see many states write or rewrite their own laws to provide maximum flexibility, because Treasury will defer on many of the specifics in “required” v. “provided” service distinctions to individual state definitions.

So if you’re a state-based public school lobbyist you should put this high on your list to consider next year.

Second, there is extreme pressure on the Left to fight everything associated with Donald Trump. This is no different. This spring, the Trump administration decided to turn this into a political football, and there’s a lot of understandable effort to try to deny Trump a win. Unfortunately though, those federal politics do not provide real, actionable governance strategies for red and purple state lawmakers.

Third, and related, from a political strategy standpoint there is pressure from DC and blue state advocacy groups to downplay how public schools can use this new money.

The thinking is that once red and purple states demonstrate proof-of-concept for how public schools can use the money, the remaining blue states will opt in. They’re not wrong about that likely result. But that is no reason tell public school leaders in those red and purple states—many of whom area already under extreme financial pressure—to ignore this funding.

Sounds like you’re pushing for opt-in, Josh.

What I’m pushing for is preparedness. Most states will opt in. That means we have a duty to help public school families and public school districts get what money they can.

Look. Had I a vote, I would have voted against the tax credit. It’s not the best way to make education policy—and it’s no substitute for direct, sustained investment in public schools.

But that’s not the question here. On the narrow matter of whether public school students and public school districts can use this funding stream too, the answer is yes. And in some places, creating new resources from bad policy is the best of several difficult choices.

Any downsides to districts turning this money down?

Public school students can use the scholarship dollars for things like afterschool programming, tutoring, technology or other educational expenses.

On the one hand, they can use those scholarships to obtain those services from school districts charging a fee as a new revenue stream. And unlike traditional vouchers, public school kids can stay in public school to do that.

On the other hand, districts aren’t the only providers out there. If districts aren’t scaling up to provide new services, they’ll likely have to partner with organizations that will. I expect a patchwork of these kinds of partnerships across states and across the country.

Go back to those SGOs for a second.

Sure. There is already a network of private school focused SGOs building itself and coordinating and networking.

In some states, public school serving organizations like districts and school boards are beginning this work too. If you’re not doing it—or at least having conversations about it—you should start.

Think about your district foundation. Think about your community based foundations. Think about your exiting local partners. Think about potential sources of donor revenue.

If you don’t operate at the scale to have those conversations, think about your regional and state-level networks to connect and coordinate with down the line.

In red states, many of you already know how this works on the private side. Learn from them, and use it to your advantage.

Talk as much about what is possible as what’s impossible.

But is this a version of public education that we really want?

I didn’t want Donald Trump to win again. He did. He broke the Department of Education too.

Wishing it away doesn’t change the reality. And in this case, it doesn’t get families the services they need. And it doesn’t pay the bills for public school districts.

The argument against the idea that public schools can’t benefit from the tax credit is less of an argument about what’s possible, and more an argument that we don’t want to go down this road of fee-for-service public education provision.

I get that. I really do. The problem is we’re already down that road, and I’m not willing to leave public school families and public school educators alone on that road by telling them there’s nothing here for them.

What’s the Bottom Line?

By 2028, nearly all states will have opted into the federal scholarship tax credit. They’ll do so largely to keep tax donations from fleeing to other states, and because unlike traditional vouchers, public schoolers can benefit too.

And public school districts can use the dollars as a revenue stream. The only question right now is: how much?

All of this does change how we think about a variety of public school offerings and—depending on your perspective—maybe even the way public schools operate themselves.

My informed sense of things is that most of the opposition at this point is political. At least in red and purple states, much of the professional field—school superintendents, school boards, even labor—is beginning to plan for this, as they should. That’s a separate matter from political and ideologically opposed coalitions, which are still fighting the law.

This also demands repeating: the tax credit cannot replace deep, consistent investment in public schools.

I expect Treasury to weigh in with its guidelines soon. And once they do, states are going to have to make decisions quickly. I am urging the public school community—districts, labor unions, and partners such as afterschool and tutoring communities—to be ready to maximize value to public school students.

This is the best advice I can give as someone who has been in 23 states fighting school vouchers, works closely with policymakers across the country, and is trying to help folks make sense of what’s about to happen.

We may need to expand what it means to make public school policy, so that we can defend what it means to hold public school values.

Josh Cowen is a Professor of Education Policy at Michigan State University. His current research focuses on teacher quality, student and teacher mobility, and evaluations of state and local education programs. This column has been republished with permission from his The Forum with Josh Cowen Substack.