Last week, we followed the money through the new Federal Scholarship Tax Credit. An individual makes a donation to an approved Scholarship Granting Organization, or SGO. The donor may receive a federal tax credit, and the SGO uses donations to provide scholarships to eligible students. That brings us to the question many parents are probably asking: Could my child qualify?
The answer depends on two main requirements. Under federal law, a student must be eligible to enroll in a public elementary or secondary school. The student must also live in a household that meets the program's income limit.
A student does not have to attend a private school to qualify. A child may attend a public, private, or religious school and still meet this part of the requirement. A student may also remain enrolled in public school and receive a scholarship for certain education expenses allowed under federal law. We will look more closely at those expenses next week.
The income rule takes a little more explaining. Federal law says a student's household income cannot be more than 300 percent of the area's median gross income. At first glance, that sounds like another governmentphrasethat requires a calculator and an instruction manual, but it is easier to understand once we break it down.
The median income is the middle point for household incomes in an area. Imagine lining up the incomes of families in a community from lowest to highest. The median would be the point in the middle. The federal scholarship program sets its income limit at 300 percent of the area's median gross income.Insimplerterms,that means three times the area's median income.
However, there is not one income number that applies to every family in Oklahoma. Theamountcanchangebased on where a family lives and the size of the household. A family in one part of the state may have a different income limit than a family living somewhere else. That is an important difference from a programthatusesoneincome limit for everyone across the state or country.
The law also looks at household income from the calendar year before the family applies for a scholarship. For example, if a family applies for a scholarship in 2027, the income used to decide whether the student qualifies would come from 2026.
The Scholarship Granting Organization has another job here. It must check the student's household income and family size before awarding a scholarship. The SGO cannot simply take a parent's word that the family meets the income requirement.
Some details about exactly how SGOs will verify income are still being worked out. The IRS and U.S. Treasury Department have been developing rules for the new program, which does not begin until January 1, 2027. Families should expect SGOs to ask for information that shows household income and family size when applications begin.
Thereisanotherimportant point that can easily get lost in all these rules. Being eligible does not guarantee a scholarship. A child may meet both federal requirements and still not receive money. Scholarship Granting Organizations will depend on donations to fund the scholarships they award. The amount of money available, the number of students whoapply,andtherules an SGO must follow can all affect how many scholarships are available.
Federal law also gives some students priority. An SGO must first give priority to eligible students who received one of its scholarships during the previous school year. After that, it must give priority to eligible students who have a sibling who received a scholarship from that organization.
Those rules are designed to give some stability to families already using the program. They also mean a newly eligible student may not move to the front of the line simply because the child meets the income and school requirements. This is where the difference between “eligible” and “approved” becomes important.
Eligible means the student meets the basic requirements set by federal law. Approved means the student has gone through the application process and has actually received a scholarship from an SGO. For parents, that distinction matters when making plans for a child's education. A family should not count on scholarship money simply because its child appears to meet the federal requirements. Parents will need to apply through an approved SGO and wait for the organization's decision.
The amount of a scholarship may also vary. Federal law does not promise every eligible student the same dollar amount. As we discussed last week, the $1,700 figure connected to this program is the maximum federal tax credit available to an individual donor. It is not a set scholarship amount for each student.
As Oklahoma prepares for the program to begin in 2027, families will need more information from the SGOs that take part. Those organizations will play a major role in the application process, income checks, and scholarship awards.
For now, parents can remember the basic requirements. The child must be eligible to enroll in a public elementary or secondary school, and the household must meet the income limit based on the area's median income. Meeting those requirements makes a student eligible to apply, but it does not guarantee that scholarship money will be available.
There is one more part of this program that may surprise some Oklahoma parents. A student does not have to leave public school to benefit from a scholarship. Next week, we will look specifically at how public-school students may use scholarship money for certain approved education expenses, what those expenses can include, and what parents need to know before counting on that help.