The Trump administration moved decisively on Thursday to launch the nation’s first federally funded school voucher program, releasing long-awaited Treasury Department regulations that will govern a scheme set to redirect billions of dollars in federal tax revenue toward private schools — and, in a calculated political twist, potentially toward public school students as well. The rules trigger a 60-day public comment period and set a January 1 deadline for governors to decide whether their states will participate.
The program, formally called the Federal Scholarship Tax Credit, was created by last year’s sweeping Republican tax and spending bill. It offers donors a 100% federal tax credit — reimbursing up to $1,700 for every dollar given — to scholarship-granting organizations (SGOs) that then distribute funds to families. That reimbursement rate dramatically exceeds the tax incentives available for donations to churches, hospitals or other charities, meaning donors are effectively redirecting money they already owe in taxes away from the federal government and toward private intermediaries. The Congressional Budget Office estimates the program will cost the federal government $26 billion in lost revenue over the next decade.
Thirty mostly Republican-led states have already opted in. The holdouts are largely Democratic-governed states, whose leaders had said they would wait for the regulations before committing.
The political bind for Democratic governors is real and deliberately engineered. Most oppose voucher programs on principle — decades of evidence and progressive educational values alike support the argument that diverting public money to private schools weakens the institutions that serve the overwhelming majority of children. But because the program is federally funded, a governor who refuses participation doesn’t protect public school budgets; she simply declines additional dollars that could, under the program’s rules, flow to public school students for tutoring, after-school programs, special education services and supplies. States that want any piece of the program, however, must accept all of it — they cannot opt into public school benefits while blocking private school vouchers.
Crucially, the proposed rules prohibit states from restricting which schools benefit. That means public funds could flow to religious schools that exclude LGBTQ students or to private institutions that employ uncertified teachers, with no recourse for states that find those outcomes objectionable. Treasury and Education Department officials confirmed this interpretation Thursday.
Randi Weingarten, president of the American Federation of Teachers, urged governors to reject the program outright. “This is a poison pill for the 90% of American children who attend public schools,” she said in a statement. “For every precious public dollar funneled to private schools under this scheme — money that could be spent on instruction, lowering class sizes, modern buildings or new books in the library — public school parents will be hunting for stray pennies on the floor.”
Not all progressive-aligned voices agree. Nicole Pollock, president of Democrats for Education Reform, has called the decision to opt in “straightforward,” arguing governors should seize the public school funding opportunity. The Southern Education Foundation, which focuses on low-income families and students of color, announced in September it would help new and existing SGOs direct money specifically to public school families. Its president, Raymond C. Pierce, said the organization’s position had “evolved” as it learned more about the law, framing participation as a chance to bring resources to Black students and low-income communities while demanding accountability for how those resources are used.
The evidence on voucher programs, however, does not support the optimism of the program’s backers. While a handful of early, small-scale studies showed positive effects on standardized test scores, the bulk of research conducted over the past decade on larger programs shows either no measurable impact or a negative one. Additional research consistently finds that the primary beneficiaries of voucher schemes are families who were already enrolled in private schools — not the low-income families the programs claim to target.
A coalition of more than 20 education, civil rights, labor and faith-based organizations put it plainly in a joint letter: “We know that including public school students in the federal voucher program is simply a sweetener to entice states without vouchers to let the camel’s nose slip under the tent. If the federal program is anything like current state voucher programs, more affluent families that have already chosen private education will corner the voucher market.”
Under the proposed rules, eligibility extends to families earning less than three times their area median income — a threshold so high it captures an estimated 95% of all children. In Washington, D.C., that ceiling exceeds $490,000 in annual household income; in Phoenix, it sits above $337,000. SGOs will be required to undergo annual independent financial reviews, and Treasury officials say procedures will exist to remove providers that fall out of compliance. Experts nonetheless anticipate a rapid proliferation of SGOs, given that the law sets minimal requirements for their formation.
The Treasury Department and the Internal Revenue Service project the program can accommodate between 600 and 700 SGOs through 2030. Whether those organizations will prioritize student outcomes over administrative convenience — or whether wealthier, already-private-school families will, as the research suggests, capture most of the benefit — remains the central and unresolved question as governors face their January deadline.