Trump’s Education Tax Credit Has a Quality Control Problem. Is There a Private Sector Solution?

The education tax credit included in the “One Big Beautiful” act has the potential to drive tens of billions of dollars toward private school scholarships, as well as tutoring programs in public and charter schools. That’s because, starting in 2027, taxpayers may direct up to $1,700 toward qualified Scholarship Granting Organizations (SGOs) and write off the entire amount from their federal tax returns.

But what’s missing so far from that gusher of cash is much quality control. That’s bad for kids, taxpayers, and the cause of school choice—and might sink the tax credit over the long term.

As Treasury Department officials work to finalize the regulations for how exactly this provision will work, some of us think they’d be wise to allow states to add some basic regulations to protect against waste, fraud, and abuse, as well as to encourage SGOs to hold participating schools and programs accountable for boosting student outcomes. Allowing SGOs to limit scholarships to low-income or working-class kids might help, too, if the goal is to get more Democratic governors to sign on. Same with permitting protections for LGBTQ kids and families. But given the resistance to such ideas from many school choice supporters, the Trump team will likely refuse to do so.

If that’s the case, states that opt to participate will have to approve any SGO that meets the bare-bones requirements of the law, which are designed to ensure that the bulk of the money goes to services, rather than overhead, and which protect against self-dealing (i.e., parents taking the tax credit to benefit their own child’s school).

Yet that need not cause this initiative to turn into the Wild West of education choice. There’s an obvious private sector solution that could steer significant portions of the money toward high-quality (and non-discriminatory) schools and programs—if philanthropies are wise enough to stand it up.

And that’s to create organizations, akin to GuideStar or Charity Navigator, that can vet and rate SGOs and encourage taxpayers to donate to those that promote quality choices for parents and are aligned with donors’ values. (Indeed, perhaps GuideStar and/or Charity Navigator should create such a service themselves.)

Imagine landing on a “scholarship tax credit navigator” website. Users could look for SGOs based on several criteria, including:

• Location
• Types of students served (those from low-income families, students with disabilities, English language learners, homeless children, etc.)
• Ages of children served
• Types of services provided (private school scholarships versus tutoring)
• Sector(s) of eligible schools (private, public, and/or charter)
• Strength of quality control (e.g., does the SGO employ test score data to determine which schools or programs are helping students make significant growth?)
• For private school scholarships, what types of schools are served (i.e., Catholic, Christian, Jewish, all, etc.)
• For private school scholarships, whether the SGO sends funds to schools that do not admit LGBTQ students or students with LGBTQ parents, and/or students with disabilities
• Whether SGOs meet basic requirements around fiscal responsibility and governance, such as submitting to annual audits.

Done right, this would nudge the field toward high-quality choices, while maintaining a light regulatory burden at the federal and state levels—especially if philanthropists also invested in advertising efforts to drive taxpayers to the site. (Collaborations with tax filing programs like TurboTax could help as well.)

To be sure, this would be a long-term play because, in the early years at least, established SGOs, as well as large education organizations, will have a big advantage in attracting donations. School districts will stand up tutoring programs, launch SGOs connected to their PTAs or other affiliated groups, and use their vast communications infrastructure to encourage parents (and grandparents) to donate to their efforts. So, too, will charter school networks, Catholic dioceses, and existing SGOs that already provide private school scholarships.

In time, though, millions of tax filers will seek to understand what this education tax credit is all about, and a Scholarship Tax Credit Navigator could point them—and the school choice movement—in the right direction.