Playbook for Trump's $26B school choice program released

The U.S. Treasury Department has released the initial operating manual for President Donald Trump's controversial school choice program, which seeks to funnel billions in federal tax dollars to parents for education expenses like private school tuition. 

The program, dubbed the Education Freedom Tax Credit, allows individual taxpayers to direct up to $1,700 of their annual federal tax bill to nonprofits that grant scholarships to students to pay for qualified educational expenses. 

The Treasury's guidance, released Thursday, outlines the requirements states, nonprofits and taxpayers must follow in order to use the program. The Treasury and Internal Revenue Service estimate the program could generate almost $26 billion in annual contributions by 2030 and fund more than 2 million scholarships. The program begins operating in January.

"The Education Freedom Tax Credit marks a new chapter in educational freedom and opportunity by establishing America's first nationwide school choice program," said Treasury Secretary Scott Bessent in a statement. "Thirty states have already opted in, and we encourage all 50 states to participate so every American student and family can benefit."

Each state's governor must choose whether to participate in the program, and support has largely followed party lines since the Trump administration pushed through the new federal tax credit law last year. 

Republican governors, who have often backed school choice policies, support the program, while Democrats and labor unions typically oppose what they see as another harmful blow to struggling public schools. 

Public school districts have been facing mounting financial strain due to enrollment declines, increased costs and heightened competition from private or alternative schooling models. Half of public school districts reported an operating deficit in 2025, up from a third in 2024, according to the most recent sector data from S&P Global Ratings. 

Under the new federal program, public school students are also eligible to receive funds. Lobbying efforts have focused on getting Democratic governors to participate, arguing that if they don't, they're leaving money on the table that public students could use. 

New York's Kathy Hochul had planned to opt in, pending review of the Treasury's rules. But she was watching for "poison pills that could harm New York's education system," according to a May statement from the governor's Deputy Press Secretary Emma Wallner.

Representatives for Hochul didn't immediately respond to requests for comment. 

Making preparations

In anticipation of the new influx of funds, nonprofits and private schools have spent the past year preparing and expanding their organizations. 

ACE Scholarships, a Colorado-based nonprofit that's been awarding scholarships since 2000, has built out its operations so it can administer the federal program in every state and is investing $25 million this year in marketing and awareness campaigns. 

The group has separately spent about $12 million on its technology platform and has formed partnerships with roughly 2,000 schools, largely private institutions, and more than 400 agreements with religious organizations and charter school networks. It aims to grow to 4,000 partner schools after the program launches.

ACE President Jason DiFraia said the nonprofit will be "a one-stop shop to take donations, to allow parents to apply for a scholarship, to award that kid a scholarship, and for that kid to pay for their tuition or fees or qualifying expenses through our platform."

A group of Jewish organizations including Prizmah — a network of over 300 private Jewish day schools — has also launched a national nonprofit to benefit from the program. 

In Colorado, where Governor Jared Polis became the first, and so far only, Democratic leader to opt into the program, public school foundations are also preparing. 

Denver Public Schools Foundation, an independent nonprofit that typically deploys grants to students, educators and families in the public school system, has been setting up a scholarship fund that will deploy money raised through the new federal tax credit. 

The new scholarships funded through the federal program could go toward academic expenses like tutoring or test prep courses, extracurricular fees like a musical instrument or field trips, or other costs students may need help with, such as transportation to and from school or mental health services, according to Sara Hazel, president and CEO of DPS Foundation. 

A group of 18 public school foundations, including DPS Foundation, is also working to create a statewide fund that will grant scholarships to public school students. 

"What we're seeing is the needs of our students and families increasing every year, and so the importance of a new funding stream and an opportunity was just really too important and I believe worth the effort of us leaning into this," Hazel said in an interview ahead of the release.