This month, House Republicans advanced legislation that has the potential to dramatically expand education options for American families.
The House Ways and Means Committee has approved a bill that would establish a $5 billion tax credit to create education scholarships and expand the allowable uses of funds saved in 529 accounts, giving families more options to pay for education costs. But Congress should consider ways to reform other federal education funding programs, to better align with the growing movement in states across the country to expand parental choice in education.
At the state level, Texas recently became the latest to offer parents direct control of their child’s K-12 schooling through education savings accounts (ESAs). The new program will offer $10,000 to students to pay for private school tuition, tutoring and other education costs. More than half of America’s children will live in states with private school choice.
These states’ innovative approaches to funding education should inform new federal reforms to use funding provided through Title I of the Elementary and Secondary Education Act (ESEA) for 529 accounts, allowing disadvantaged parents to choose the right K-12 learning environment for their children.
Until now, 529 accounts have mostly benefited the wealthiest families. As of 2013, more than 80 percent of the funds held in 529 accounts were owned by the richest 20 percent of American households. Like Roth IRAs, investment gains in 529s are not subject to federal or state taxation.
While 529s are still largely the province of the wealthy, state-funded ESA programs are giving lower-income families access to new education options beyond public schools. For example, the legislation in Texas to establish education savings accounts prioritizes lower-income families and children with disabilities to receive available funds first.
Congress needs to replicate what innovative states have done and use ESEA dollars to fund 529s for low-income families. The result would be a one-two punch for educational opportunity and parental choice. Congress should reform the $18.4 billion Title I program, which provides funds to public schools serving lower-income children, into a direct deposit program to benefit low-income children. This alone could put $1,000 into every low-income child’s 529 account. Eligible parents in the 18 states (including Texas) with ESAs could use state and federally funded accounts to pay for educational choice.
There is already a growing movement at the state level to help lower-income families save for education expenses. Most states with income taxes provide a tax benefit for contributions to 529 accounts. Eight states now offer state tax deductions or credits to encourage employers to fund employees’ education savings accounts. In addition, more than 80 initiatives across the country provide direct deposits into children’s 529 accounts to help families begin saving.
Evidence suggests these programs benefit working families. Researchers studied a pilot program in Oklahoma that put $1,000 seed investments into children’s 529 accounts; the study found that children and their parents receiving seed investments experienced financial, social and emotional benefits. And while ESAs are relatively new and have not yet been the focus of empirical research, they have proven overwhelmingly popular with parents. The number of children using ESAs has increased from 63,000 in 2023 to 489,000 in 2025. Broadly, decades of research evaluations have revealed generally positive results from private school choice programs, including increasing educational attainment.
President Trump has rallied behind a new template for educational policy based on empowering “every parent in America … to send their child to public, private, charter, or faith-school of their choice.” But closing the Department of Education and sending federal educational dollars to the states, while both laudable in their own right, is ultimately not the same as “universal school choice.” In progressive states, there remain too many powerful, entrenched special interests against increased educational choice, such as teachers unions and their political allies in elected office and the administrative state.
Thus, true universal choice will happen only if the federal government empowers working families — not anti-school-choice politicians and state bureaucrats — to save and invest for their children’s future.
Dan Lips is a senior fellow with the Foundation for Research on Equal Opportunity (FREOPP). Michael Toth is a resident fellow at FREOPP and a research fellow at the University of Texas at Austin Civitas Institute.
