Understanding the Federal Scholarship Tax Credit
Resources for schools, scholarship organizations, and education partners navigating the Federal Scholarship Tax Credit.
What Is the Federal Scholarship Tax Credit?
The Federal Scholarship Tax Credit (FSTC) is a federal income tax credit that allows individuals to receive a dollar-for-dollar tax credit for donations made to approved Scholarship Granting Organizations (SGOs).
SGOs use these donated funds to award scholarships that help eligible students pay for qualified K–12 education expenses, including tuition, tutoring, curriculum, technology, and other approved costs.
The program operates through the federal tax code rather than as a federal education program. States choose whether to participate, and SGOs are responsible for administering scholarships and meeting compliance requirements.
Who the FSTC Supports
The Federal Scholarship Tax Credit is designed to support eligible K–12 students and their families by helping make educational options more accessible.
Depending on state participation and program structure, FSTC-funded scholarships may support students across a range of learning environments, including:
- Private and faith-based schools
- Charter schools
- Independent schools
- Public schools
- Homeschool and hybrid education models
Scholarships may be used for qualified K–12 education expenses as defined in federal law and administered by approved Scholarship Granting Organizations.
FACTS partners with schools to make these transitions smoother, whether you are new to school choice or strengthening your systems. Our tools and expertise help you remain audit-ready, compliant, and sustainable even as policies change.
FSTC Resources
How FACTS Supports the FSTC
FACTS supports Scholarship Granting Organizations and schools involved in school choice by providing technology, operational support, and program expertise that help manage complexity across application intake, eligibility verification, scholarship administration, and reporting.
Across both state and federal programs, FACTS works behind the scenes to help organizations scale participation, maintain compliance, and coordinate multiple funding sources without adding unnecessary administrative burden. Our approach focuses on creating clear, consistent workflows that support families, schools, and scholarship organizations as programs evolve.
With experience supporting thousands of schools and dozens of scholarship programs nationwide, FACTS brings the infrastructure and insight needed to help school choice initiatives operate smoothly—today and as new opportunities emerge.
FAQs
School choice programs raise important questions for private schools. This FAQ section answers the most common questions administrators and business leaders ask, from tuition strategy to compliance, to help you understand how participation works.
Most programs are funded at the state level through Education Savings Accounts (ESAs), vouchers, or tax-credit scholarships. Each state sets its own eligibility rules, funding caps, and disbursement schedules. At the federal level, the new tax credit scholarship program will begin in 2027, and states must opt in to participate.
Not always. Each state sets participation requirements. These may include accreditation, nondiscrimination policies, financial reporting, or student testing. Schools should review their state’s rules before deciding to participate.
Yes, they can. Some schools keep tuition steady to remain accessible, while others model modest increases based on new funding streams. FACTS Tuition Management and Advanced Accounting tools help leaders forecast revenue scenarios, segment funding by source, and evaluate the impact of participation before making tuition changes.
Award sequencing is key. FACTS Financial Aid Management can apply state or SGO funds first, then layer in internal aid. This prevents over-awards, keeps awards equitable, and helps schools stay compliant with program rules.
Many schools designate a compliance lead or create a small cross-department team (business office, admissions, financial aid). FACTS helps reduce workload by centralizing applications, payments, and reporting, so schools can manage participation without significant additional staffing.
Programs usually require detailed documentation of student eligibility, funds received, and how dollars are applied. FACTS products generate audit-ready reports, segment tuition by funding source, and store required documentation so your school is prepared.
In most cases, yes. Scholarships or ESA funds may cover part of tuition, and families remain responsible for the remainder. Families may also combine multiple funding sources, such as state programs and private aid.
Clear communication is essential. Schools often use checklists, FAQs, and reminders to help families understand timelines and documentation. FACTS provides templates, notifications, and website services to make the process easier for families and staff.
Ready to Start the Conversation?
We’ll help you take care of the how, so you have more time to focus on your why.
