If you have followed the growing talk about school choice, you have probably heard the word “voucher.” You may have also heard about scholarships, tax credits, Education Savings Accounts, and grants. Sometimes these words are used as if they all mean the same thing.
They do not. The difference matters. Each program moves money in a different way. Who provides the money, who receives it and what it can pay for can change from one program to another.
Before we start following the money, it helps to understand the words being used.
A traditional school voucher uses government money to help an eligible student attend a private school. The money helps pay for the child’s education instead of all of those funds staying in the public-school system.
Oklahoma already has a program that the Oklahoma State Department of Education describes as a voucher. The Lindsey Nicole Henry Scholarship helps certain students attend approved private schools. We will look more closely at that program later in this series, including who may qualify and how the amount is figured.
A scholarship is different. A scholarship is money given to help pay for a student’s education. Scholarships can come from private groups, nonprofit organizations or programs created by the government.
That brings us to a term parents will be hearing more often: Scholarship Granting Organization, or SGO.
An SGO collects donations and uses the money to give scholarships to eligible students. These organizations are an important part of the new federal Education Freedom Tax Credit.
Under the federal program, the government will not simply send each eligible family a school-choice check. Instead, people will be able to donate money to approved scholarship organizations. A donor may receive a federal tax credit for the donation. The scholarship organization then uses the donated money to help students pay approved education expenses.
This is called a tax-credit scholarship.
It is easy to see why people get confused. A tax-credit scholarship can help a child pay for education, so some people may call it a voucher. Butthemoneydoesnottravel the same way.
With a traditional voucher, government money helps pay for a child’s education. A tax-credit scholarship takes a different route. A donor gives money to an approved scholarship organization and may receive a tax credit. The organization then uses donations to provide scholarships to students.
There is one important point to remember: The donor’s tax credit is not the child’s scholarship.
That difference will matter when the new federal program begins. Under the Education Freedom Tax Credit, an individual may receive a federal tax credit of up to $1,700 for an approved donation to a Scholarship Granting Organization.
That does not mean a parent receives $1,700. It also does not mean every student will receive a $1,700 scholarship. The tax credit belongs to the donor. The scholarship is awarded separately to a student.
We will follow that money step by step next week.
Oklahoma parents also need to understand another kind of tax credit because our state already has one.
The Oklahoma Parental Choice Tax Credit works differently from a tax-credit scholarship. Under this program, an eligible parent may receive a state income tax credit for certain education expenses.
For private-school families, those expenses may include tuition and fees. Oklahoma also has a separate tax credit for certain homeschool expenses. We will look at the amounts, income rules, applications, and other details later in this series.
For now, there is an easy way to remember the difference.
With Oklahoma’s Parental Choice Tax Credit, the parent may receive the tax credit for approved education expenses. With the new federal Education Freedom Tax Credit, the donor may receive the tax credit for giving money to an approved scholarship organization.
The word “tax credit” appears in both programs, but they do not work the same way.
Then there are Education Savings Accounts, often called ESAs.
An ESA allows approved education money to be used for certain costs connected to a child’s education. The rules depend on the program. In some states, the money may be used for private-school tuition, tutoring, curriculum, education services, or other approved costs.
ESAsaresometimescalled vouchers because both can allow education money to be used outside a traditional public school. However, an ESA may give families more than one way to use the approved funds instead of using the money only for school tuition.
Education grants are another type of help. A grant is money provided for an approved purpose and usually does not have to be paid back. Grants can come from the government, nonprofit groups, foundations, or other organizations. The rules depend on the grant and what it was created to pay for.
Sowhydoesitmatterwhat we call all of these programs?
Becausethenamecanhelp usunderstandwhathappens to the money.
Imagine two Oklahoma families receiving help with education costs. One family receives a state tax credit after paying approved privateschool expenses. Another child receives a scholarship from an organization that collected money from donors.
Both families received help with education costs, but the money reached them in different ways.
The same problem comes up with the word “voucher.” Sometimes voucher is the correct name for a program. Other times it is used as a general word for almost any program that helps families pay for education outside a traditional public school.
That may make schoolchoice programs sound simpler than they really are.
Parents need more than a label. They need to know where the money comes from, who receives it, who gets the tax credit, what the money can pay for and who may qualify.
Those questions will become even more important as Oklahoma expands its school-choice programs and prepares for the new federal program.
Next week, we will put these definitions to work and follow the money through the new federal Education Freedom Tax Credit. We will look at what happens when someone makes a donation, what a Scholarship Granting Organization does with the money and how that money may eventually help pay for a child’s education.