President Donald Trump signed a sweeping tax and spending bill into law on July 4, and tucked within it is a major education policy shift: a new federal program that will direct public funds to private school tuition through tax credits.
This marks the first time a federal program of this kind will use taxpayer incentives to help fund private education. The program survived a turbulent path through Congress and emerged from last-minute negotiations with key changes.
How It Works
The policy allows individual taxpayers to receive federal tax credits when they donate to nonprofit scholarship organizations. These organizations then use the donations to fund K–12 scholarships for students to attend private schools.
In effect, the government is encouraging private donations for private school tuition by reimbursing donors through tax breaks.
What’s New in the Senate Version
The Senate version of the bill removed a critical limit from the original House version passed in May: there is now no cap on how much the government can spend on the program. That makes it an open-ended commitment with uncertain fiscal consequences.
Additionally, the program is no longer temporary—it has been made a permanent part of the federal tax code.
Why It Matters
Supporters argue this is a major step for school choice advocates, giving families more educational options. Critics, however, warn that the program could drain resources from public schools and increase inequality in the education system.
The financial impact remains unclear, but with no cap in place, the program could cost the federal government billions over time.
This development marks a significant pivot in federal education policy, with long-term implications for both public and private schools across the country.