"The Federal Scholarship Tax Credit is not a zero-sum game. It’s about serving kids wherever they are. It creates opportunities for educational enrichment for public school, private school, and home-schooled students equally. The challenge for SGOs will be to successfully manage reporting and compliance obligations at scale while maintaining a steadfast focus on their core mission."
Sarah Raybon, ClassWallet Vice President of Business Development
"The Federal Scholarship Tax Credit is not a zero-sum game. It’s about serving kids wherever they are. It creates opportunities for educational enrichment for public school, private school, and home-schooled students equally. The challenge for SGOs will be to successfully manage reporting and compliance obligations at scale while maintaining a steadfast focus on their core mission."The New Paradigm of Educational Opportunity
In 2025, Congress enacted the Federal Scholarship Tax Credit (FSTC) as part of the One Big Beautiful Bill Act. Starting January 1, 2027, the FSTC empowers individual taxpayers to direct private donations (up to a $1,700 dollar-for-dollar tax credit) toward approved scholarship organizations supporting K-12 students. Importantly, the initiative can provide financial support for eligible students that can be used for approved educational expenses, including tuition, tutoring, instructional materials, therapy, and technology.
The FSTC will be a game changer, creating a universal tool that helps promote educational equity through targeted scholarships. This approach provides supplemental funding to meet the specific needs of an individual child, regardless of where they learn whether enrolled in public school, attending a private school, or educated at home.
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At its core, the FSTC is about meeting students where they are. Rather than focusing solely on traditional classroom settings, the FSTC gives SGOs the ability to prioritize the essential resources children need to learn, grow, and thrive outside the school day. It empowers Scholarship Granting Organizations to fulfill a truly student-centric mission, one that values meaningful outcomes over tradition.
However, bringing this vision to life requires the right operational foundation. Realizing this level of educational opportunity depends on robust digital support. By leveraging ClassWallet, SGOs can easily navigate the complex compliance and reporting requirements set by the U.S. Treasury Department and the IRS, allowing them to stay focused on serving students.
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Supporting Students Beyond the Classroom
True educational equity requires more than just tuition assistance. It requires a commitment to supporting the complete student.
Often, the largest barriers to a child’s education exist outside of regular school hours. Using FSTC funds for services like tutoring, therapy, and after-school programs helps level the playing field, giving every child the chance to benefit from learning opportunities beyond the school day.
These services can also help students in public schools overcome the impact of the “summer slide,” which is one of the most significant contributors to the lifelong wealth gap in the United States.
From 2025 to 2026, 67% of households earning over $100,000 participated in structured summer enrichment, compared to only 38% of households earning less than $50,000. By the end of 5th grade, low-income students who lack summer enrichment can lag behind their higher-income peers by 2.5 to 3 years in cumulative learning, a gap that rarely closes during the school year. *
*Source: Youth Sports Business Report May 2026
Data consistently illustrates that low-income students often lack access to the essential services routinely available to higher-income students. The FSTC gives SGOs a way to direct resources toward a student’s specific needs, whether that means tutoring, therapy, or afterschool enrichment.
An Infrastructure of Integrity
As the January 2027 launch approaches, the FSTC presents a massive opportunity alongside steep operational hurdles. To scale effectively, SGOs must adopt technology that solves two distinct sets of challenges:
The SGO Challenge: Scaling Administration and Compliance
Managing the entire scholarship lifecycle, from initial donation intake to final audit, demands sophisticated infrastructure. Organizations must navigate complex reporting requirements, actively work to prevent fraud, and maintain strict program compliance without bogging down their internal teams.
The Family Challenge: Simplifying Access
Maximizing the benefits of the FSTC means making the system effortless for parents. Families need a seamless way to find approved providers, enroll their students, and purchase educational materials. Without an intuitive platform, administrative barriers risk preventing the very families who need this opportunity most from fully realizing the value of their scholarship.
The Solution: A Unified Fund Management Platform
ClassWallet helps distribute scholarship funds directly to approved schools and service providers, removing the reimbursement step that slows families and adds work for SGO staff. This is designed to reduce administrative hurdles for families, so they can utilize scholarship dollars. At the same time, providers receive payment directly through the platform, which makes it simpler for them to serve scholarship students.
If an SGO opts to allow the purchase of educational resources, ClassWallet can provide a curated network of retail vendors. Families can shop with confidence inside program eligibility rules, at retail prices with no markup. The platform is designed to generate confidence scores for transactions and apply OCR technology to receipts and invoices, keeping the program audit-ready from application through reporting.
SGO Excellence: Maximizing Mission, Minimizing Burden
The goal for any SGO leader is to grow the mission while minimizing the administrative load on their team. The FSTC is a significant growth opportunity, but it also carries real operational risk. Under an operational risk-reduction model, SGOs stay focused on their core work of fundraising and advocacy, while ClassWallet runs the donor portal, family application, funds disbursement, and reporting end to end. That division of labor is what lets an organization manage large donation volumes and support thousands of families without building a large-scale administrative team of its own.
For more than 12 years, ClassWallet has supported education savings account, grant, and scholarship programs across 38 states, distributing more than $7 billion to 1.3 million families and participants.