Federal Scholarship Tax Credit Could Unlock Millions for Delaware Students

New federal scholarship program could expand educational opportunities for thousands of Delaware students without requiring additional state education spending.

What if Delaware could unlock millions of dollars in additional educational resources, helping thousands of students access tutoring, specialized services, technology, and other learning opportunities?

That is the potential behind the new Federal Scholarship Tax Credit, a program scheduled to begin January 1, 2027, that could significantly change how families access educational support.

In a recent episode of A Better Discussion, Jane Brady, Chair of A Better Delaware, welcomed two national education policy experts to discuss the program's development, its potential impact, and what Delaware must do to participate.

The guests included John Schilling, former president of the American Federation for Children and a member of the Federal Scholarship Tax Credit Coalition's steering committee, and Patrick Graff, Senior Fellow at the American Federation for Children.

Their discussion highlighted an opportunity for Delaware families and an important decision facing state leadership.

What Is the Federal Scholarship Tax Credit?

The Federal Scholarship Tax Credit allows eligible taxpayers to contribute to qualified Scholarship Granting Organizations (SGOs) and receive a federal income tax credit for their contributions.

Beginning in 2027, individual taxpayers may qualify for a 100% nonrefundable federal tax credit of up to $1,700 annually, subject to applicable tax liability and program requirements.

These contributions fund scholarships that families can use for qualifying educational expenses.

Unlike traditional education funding programs, which generally distribute money through government agencies and school districts, this program is designed to put educational decisions directly into the hands of parents.

Importantly, the scholarships are not limited to private school tuition.

Eligible educational expenses can include:

• Academic tutoring and supplemental instruction

• Specialized educational services for students with disabilities

• Educational technology, books, and learning materials

• After-school enrichment programs

• Qualifying school tuition and fees

• Transportation for educational purposes

The program is intended to support students attending public, charter, and private schools, making it potentially beneficial to a broad range of Delaware families.

The Potential Impact: Millions in Scholarships for Delaware

During the discussion, Patrick Graff shared research estimating the program's potential financial impact on Delaware.

According to Graff, approximately 150,000 Delaware K–12 students, or nearly 92% of the state's student population, could meet the program's income eligibility requirements.

He also estimated that nearly 400,000 Delaware taxpayers have federal income tax liability and could potentially participate as donors.

Even modest taxpayer participation could generate substantial educational resources.

The accompanying illustration highlights a scenario in which $64 million could support approximately 23,000 scholarships, based on an average scholarship of $2,800 and 15% taxpayer participation. These figures are illustrative projections, not guaranteed funding or scholarship awards.

During the interview, Graff presented another scenario: If 10% of eligible Delaware taxpayers contributed, the program could generate approximately $86.2 million annually, potentially supporting nearly 30,000 scholarships using an estimated average award of $3,000.

While these projections use different assumptions, both demonstrate the potential scale of the opportunity.

Graff also suggested that participation could increase over time as more taxpayers and families become familiar with the program.

A Program Designed to Benefit Public School Students, Too

One of the most important points emphasized during the conversation was that the Federal Scholarship Tax Credit is not exclusively a private school choice initiative.

Public school students could be among its largest beneficiaries.

For example, a family whose child struggles with reading may be unable to afford private tutoring. Another family might need specialized technology or services to help a child with a learning disability.

The scholarship program could help make those resources accessible.

Delaware families choosing a public school outside their assigned district may also face transportation costs that make their preferred educational option difficult to access. Qualifying scholarships could help address those expenses.

Schilling emphasized that the program was intentionally designed to serve students across different educational environments.

The goal, he explained, is to provide additional educational resources rather than replace services schools are already responsible for delivering.

Why Parental Choice Matters

A central theme of the discussion was the importance of giving parents greater authority over educational decisions.

Rather than having scholarship funds distributed directly to school districts for administrators to allocate, families would seek support through qualified scholarship organizations for services that meet their children's individual needs.

This approach recognizes that educational challenges are not identical for every student.

One child may benefit from intensive math tutoring. Another may need assistive technology, specialized instruction, or enrichment opportunities beyond the traditional classroom.

The program is designed to give families more flexibility to pursue those solutions.

Schilling and Graff also discussed research suggesting that expanded educational choice can encourage improvements within traditional public schools. Graff cited more than 30 studies examining the relationship between school choice programs and public school performance, arguing that competition can create incentives for schools to improve.

Although the broader effects of school choice remain a subject of policy debate, the speakers emphasized that strengthening educational opportunities should benefit students regardless of where they attend school.

Delaware's Decision: Will the State Participate?

The Federal Scholarship Tax Credit is a federal program, but state participation is essential for students to benefit.

Under the framework discussed by the experts, governors must elect to participate and submit a list of qualified Scholarship Granting Organizations.

At the time of the interview, Delaware had not opted into the program.

Schilling explained that taxpayers may still be able to contribute to qualifying scholarship organizations serving participating states, even if their home state does not participate.

However, Delaware students would not be able to access the same scholarship opportunities without the state's participation.

The speakers emphasized that the program does not require Delaware to appropriate additional state education dollars. Instead, it uses federal tax incentives to encourage private contributions to scholarship organizations.

For supporters, this presents an opportunity to bring additional educational resources to Delaware without increasing the state education budget.

What Happens Next?

The program is scheduled to begin in 2027, with federal implementation rules and administrative requirements continuing to develop.

The discussion identified several important steps ahead, including finalizing Treasury regulations, establishing qualified scholarship organizations, and educating taxpayers and families about how the program works.

The experts also stressed the importance of raising awareness among accountants, employers, community organizations, and parents.

Taxpayer participation will ultimately determine how much scholarship funding becomes available.

For Delaware, the more immediate question is whether state leaders will take the necessary steps to make these opportunities available to eligible students.

An Opportunity Worth Examining

Delaware continues to face difficult questions about educational achievement, student needs, and how to make the most effective use of available resources.

The Federal Scholarship Tax Credit introduces another potential approach: encouraging private contributions to support educational services selected by families.

Whether the program ultimately delivers tens of millions of dollars in scholarships will depend on state participation, taxpayer contributions, qualified scholarship organizations, and demand from families.

But the opportunity deserves serious consideration.

For Delaware students who need additional educational support, access to the right resources could make a meaningful difference.

Watch the Full Discussion

Hear Jane Brady's conversation with John Schilling and Patrick Graff as they explain the Federal Scholarship Tax Credit, its development, and what it could mean for Delaware families.

Watch the full episode of A Better Discussion to learn more about this emerging educational opportunity.

Source: A Better Discussion, hosted by Jane Brady, featuring John Schilling and Patrick Graff. Financial estimates are projections discussed by the guests and should not be interpreted as guaranteed scholarship funding.