When President Trump signed the One Big Beautiful Bill Act into law last summer, it created the country’s first federal K-12 education choice program. The program won’t formally launch until January 2027, but organizations everywhere are already asking what the law actually says — and what it might mean for them. There still aren’t answers to every question, since the U.S. Treasury regulations that will govern implementation aren’t expected until later this summer. But a preview of the regulations released last month provides some real direction.

Here’s what any education sector leader should know about the program.

At its core, the Federal Scholarship Tax Credit (FSTC) lets individual taxpayers donate up to $1,700 to an approved scholarship granting organization (SGO) and get a federal tax credit for the same amount. SGOs collect those donations and distribute them to eligible students for eligible educational expenses. Simple enough in theory — but the details of the statute matter quite a bit.

Governors get to decide whether their state participates. So far, 31 states have opted in, and four governors have said they won’t. States that opt in must submit a list of approved SGOs to the U.S. Treasury. Once approved, those SGOs can solicit donations and start distributing scholarships.

There’s been plenty of speculation about whether governors could add their own requirements for SGOs on top of the federal ones — effectively shaping the program by picking and choosing which SGOs get to operate. The regulatory preview suggests that won’t be an option, though nothing stops a governor from steering the program through soft power or the bully pulpit.

The requirements SGOs must meet are spelled out in the statute. They have to be nonprofits (not private foundations), they can’t commingle FSTC donations with other funding, and they must steer clear of channeling scholarships to specific students or schools. They also need to be located in the state where they operate and distribute at least 90% of their income as scholarships.

The regulatory preview suggests a fairly low bar for what counts as “located in a state” — basically, an SGO just needs to be authorized to do business there and follow the state’s charitable organization rules. That should make it easier for SGOs to operate across state lines, which could help the FSTC scale quickly. The 90% rule looks like it’ll be a tougher constraint, though. Some had hoped it would apply only to donation income, not total organizational income, but the regulatory preview indicates otherwise. In practice, that probably means existing nonprofits with other lines of work will want to spin up a new 501(c)(3) to run an SGO.

Taxpayers can donate up to $1,700 a year to an SGO and claim a credit for the same amount on their next return. They can contribute across state lines, but an SGO can only distribute scholarships within its own state. (A state that opts out risks losing a slice of its residents’ charitable giving to SGOs operating elsewhere.)

Because the individual credit is capped, the whole game becomes scale. SGOs will need to line up a lot of small donations to add up to meaningful scholarship funding — which is why many existing and emerging SGOs are already strategizing about partnerships with large employers that can offer SGO donation options as a payroll deduction.

Student eligibility is simple, and broad. Students qualify if they’re eligible to enroll in public elementary or secondary school and belong to a household earning no more than 300% of area median gross income — anywhere from $33,000 in one South Dakota county to nearly $200,000 in one California county. The eligibility of home-schooled students is still uncertain and will likely depend on how “school” is defined in state statute. Eligible expenses follow the Coverdell Education Savings Accounts provision, and the list is a long one. Tuition, fees, tutoring, special education services, books, supplies, transportation, technology, and more are all fair game for students in public or private schools.

The proposed regulations are still forthcoming, but sector leaders aren’t waiting to start planning. The stretch between September and December will move fast, and there will be real advantages to moving first.

Here are some questions and considerations worth exploring as the FSTC program takes shape over the next five months:

• State Policy Leaders: Has your state opted in? If you have a gubernatorial election this fall, how might the outcome shift participation? If your state hasn’t opted in, do leaders understand how the program could benefit public school students, too, not just fund private school scholarships? And if your state has opted in, what SGOs already exist or are emerging — and how might you help shape that landscape so students get coherent, well-organized access to a wide range of resources?
• Existing or Emerging SGOs: Several national SGOs with track records in state-level school choice are already expanding in preparation for the program’s launch in January, and other national efforts are launching from scratch. At the same time, state and regional nonprofits are weighing whether to start their own. What’s your plan for recruiting donations at scale? Which expenses will you prioritize? Are you targeting a particular student population? Will you build the back-office functionality and tech stack required to process scholarships or partner with a vendor to provide that support? And with the number of SGOs likely to grow fast, how does your approach complement — rather than duplicate — what peer organizations are building?
• Parent Advocates: Most families have never navigated anything like this before, so the awareness gap is as real as the funding gap. What do you need to know about how to find an SGO in your state, how the application and award process works, and how you can use scholarships? Families further from opportunity may face real barriers and need navigation support (e.g., help with language translation, assistance selecting learning options and completing paperwork, or simple awareness that the program exists at all). There’s also a role to play in consumer protection — families will need help telling reputable organizations apart from opportunists, and clear, plain-language explainer materials could go a long way.
• K-12 Schools: Private schools should be planning for what the FSTC program means for scholarships for the students they serve, especially in states that have not previously had private-school choice programs in place. But public schools have a stake in this, too. Many of the eligible expenses (tutoring, supplies, technology) could be used to supplement what a public school already offers. What’s the role of schools in helping families understand that, while the program can help some students leave the public system, it can also offer academic supports and services to students who remain?
• Providers (including tutoring and after-school programs): This is a new funding stream for a wide range of products and services, so it’s worth asking: Is your product or service an eligible expenditure? If so, what’s your direct-to-family value proposition? How might the program change the purchasing power of existing customers, and what does that mean for your path to impact and your long-term financial sustainability?

None of these questions have easy answers yet — and that’s the point. The FSTC is a new kind of program, and the regulations due out this summer will settle a lot, but not everything. Leaders across the sector must start thinking now about the implications for their organizations, their states, and the students they serve so that they’re organized and ready to act when the program launches in January 2027.