The Case for Pennsylvania Tax-Credit Scholarships
Tax-credit scholarships are vital to Pennsylvania students and families. But they could help even more kids if lawmakers in Harrisburg got out of the way.
Of course, I’m talking about Pennsylvania’s flagship scholarship programs: the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC). Since their inception, these programs have helped hundreds of thousands of kids find and afford the schools of their choice.
But I am also referring to a new opportunity for Pennsylvania: the Federal Scholarship Tax Credit (FSTC). Enacted July 4, 2025, the new federal program creates a dollar-for-dollar tax credit for individuals who donate up to $1,700 to scholarship-granting organizations (SGOs).
Eligible public and private school students can use these funds for tuition, books, tutoring, special needs services, and other education-related expenses.
These scholarships provide a lifeline to Pennsylvania’s lower- and middle-income families. Most EITC and OSTC recipients live in households earning between $41,000 and $73,000 annually — well below the statewide median family income of $100,557. The Children’s Scholarship Fund Philadelphia reports a median household income of $43,155 for its recipients — about 28% lower than the city’s median.
Last year, K–12 students in all 67 Pennsylvania counties received an EITC or OSTC scholarship. Year after year, these scholarships defy the artificial barriers maintained by an education system that traps kids inside their zip codes.
In addition to benefiting students, these scholarships are also a boon for taxpayers. These scholarships rely entirely on private funding, shifting the financial burden of education costs away from public coffers. An EdChoice analysis estimates that EITC and OSTC have generated savings ranging from $6 billion to $11.9 billion for Pennsylvania taxpayers over the programs’ lifetimes.
In fact, EITC and OSTC ensure that Pennsylvania families have the power and resources to vote with their feet. As we witnessed during the COVID-19 pandemic, millions of dissatisfied families nationwide swapped their district schools for alternatives, everything from cyber charters to homeschooling. Tax-credit scholarships inject competition into a system that is long overdue for innovation, empowering families to hold failing schools accountable through the power of exit.
And the need for educational choice couldn’t be more urgent in Pennsylvania. More than 200,000 students attend one of the commonwealth’s chronically low-achieving schools, many of which reappear on this infamous statewide list year after year.
What are families and students to do when these schools repeatedly fail them? Hope and pray that they’ll get better in a few years? That’s far from a reasonable educational policy; that’s a prison sentence.
A better policy plan would expand EITC and OSTC. Nearly 170,000 applications were submitted in the 2023–24 school year, but about 101,000 received a scholarship. That means nearly 69,000 student applicants were denied or waitlisted because of the program’s arbitrary caps.
The supply of scholarships can’t keep up with demand, but some simple reforms can address this scarcity. Removing the program caps on EITC and OSTC would allow individuals and businesses to donate more to the program, freeing up more charitable giving and providing more scholarships. Also, adding FSTC into the mix would provide a whole new revenue source for students.
Unfortunately, such reforms face an uphill battle in Harrisburg. In his most recent spending plan, Gov. Josh Shapiro proposed taking tax credits away from scholarship organizations to fund public school programs. Doing so ignores the tens of thousands of kids denied scholarships or stuck on a waiting list.
Shapiro is also standing in the way of Pennsylvania kids accessing the FSTC. Before the donations can flow to Pennsylvania’s more than 250 SGOs, the governor must first opt in — something that he has yet to publicly endorse. When he does, the commonwealth will join the other 28 states that have either officially opted in or expressed their intention to do so.
But blocking these scholarship programs is a politically risky move. Polling by the Commonwealth Foundation has found that seven out of 10 Pennsylvanians want Shapiro to opt into the FSTC program, and nearly 80% support expanding EITC and OSTC.
These programs also make financial sense. If only 15 percent of Pennsylvania tax-filers donate to receive the FSTC, the commonwealth would garner nearly $500 million in scholarships, according to an estimate by Education Reform Now. Plus, the startup costs in Pennsylvania are low. Thanks to EITC and OSTC, Pennsylvania already has more than 250 SGOs ready and able to deliver these scholarships.
Tax-credit scholarships have earned their keep as a cost-effective, demand-driven products that have helped hundreds of thousands of Pennsylvania kids. Shapiro and state lawmakers should stop blocking families’ access to educational opportunities and expand state programs while capitalizing on the new federal program.
Anything less shortchanges Pennsylvania kids in dire need of a better education.
