US Education Secretary to highlight new federal scholarship tax credit

U.S. Education Secretary Linda McMahon is set to visit the Lubavitch Educational Center in Miami to highlight the upcoming Education Freedom Tax Credit (FSTC). The program, established as part of federal tax legislation, is scheduled to launch on January 1, 2027.

Under the FSTC, taxpayers can receive a dollar-for-dollar federal tax credit of up to $1,700 annually, or $3,400 for married couples filing jointly, for contributions made to approved nonprofit Scholarship Granting Organizations (SGOs). These funds are intended to provide scholarships for K–12 private school tuition, tutoring, and other educational expenses.

Recent Treasury guidelines regarding the FSTC have drawn scrutiny. While the administration suggests public school students could benefit, critics express concern that the guidelines allow SGOs to act as middlemen for private equity firms. The current framework permits SGOs to retain a 10 percent cut of contributions and grants them decision-making power over fund distribution, including the ability to direct money toward religious schools. Additionally, the guidelines do not currently allow states to impose earmarks for low-income families or prevent discrimination in fund allocation.