An Education Freedom Account is a state-funded, restricted account that lets a parent redirect a child’s share of public education dollars toward private school tuition, homeschooling, tutoring, therapies, and other approved learning costs. New Hampshire launched the first program under this name in 2021, and Arkansas adopted its own version afterward. Roughly 17 states run some form of education savings account as of early 2026, though only New Hampshire and Arkansas use the “Education Freedom Account” label; the rest operate under names like “education savings account” or “empowerment scholarship.” Eligibility rules, deposit amounts, and allowed expenses differ by state, so what follows describes the shared structure with state-specific notes where they matter.
How the Money Flows
Instead of sending a student’s per-pupil funding to a school district, the state deposits it into a restricted account the parent controls. The deposit is usually tied to the state’s per-pupil adequacy grant, which is the amount the state would otherwise spend on that child in a public school. Some programs add extra funding on top of the base for students who qualify for free or reduced-price lunch, have disabilities, or are English language learners. A student who fits more than one of those categories can draw a larger deposit than a student who qualifies only for the base.
These are not checking accounts. Funds sit in a digital wallet run by a third-party platform, and every purchase has to fall within an approved category. Parents cannot pull cash out, and any refund for a returned item goes back into the account rather than to the household. Most programs release money in installments across the year rather than as a single lump sum.
Who Qualifies
Most programs require that the student be school-age (typically five to twenty), live in the state offering the account, and not be enrolled full-time in a traditional public school while receiving funds. Beyond that, states diverge sharply.
Some cap eligibility by income, using a multiple of the federal poverty guidelines. A ceiling set at 350 percent of the federal poverty level, for example, would cap a family of four at $115,500 based on the 2026 guidelines.1HHS ASPE. 2026 Poverty Guidelines Other states have opened their programs to every family regardless of income. New Hampshire originally used the 350 percent cap but removed the income limit entirely in 2025.
Where an income test still applies, eligibility is usually calculated from the adjusted gross income on the most recent federal tax return. Families who don’t file may need to submit benefit statements or other proof of income. Residency has to be established at application and kept up through the school year.
Priority When Demand Exceeds Funding
When more families apply than the program can fund, states rank applicants. Returning students almost always come first. After that, common priority groups include students with disabilities, students experiencing homelessness, children in foster care, students leaving low-performing schools, children of military families or first responders, and first-time kindergartners. Applicants outside every priority category go into a general pool and get funded as budget allows.
What the Funds Can Pay For
The approved-expense list is wider than most parents assume. Common categories include:
- Tuition and fees at private schools, non-public online programs, career and technical schools, summer education programs, and institutions of higher education.
- Curriculum and instructional materials, including textbooks, educational software, and supplemental materials tied to a curriculum or provider.
- Tutoring from individual tutors or tutoring centers.
- Computer hardware, internet connectivity, and other devices primarily used for the student’s education.
- Testing fees for nationally standardized assessments, AP exams, college admission tests, and prep courses for those tests.
- Occupational, behavioral, physical, speech-language, and audiology therapies.
- Fee-for-service transportation to and from an education provider.
- School uniforms.
Most programs also include a case-by-case category, so a scholarship organization can approve an unusual expense that doesn’t slot into a standard heading.
What They Can’t Pay For
The “primarily used for education” language matters. A laptop for schoolwork qualifies. A gaming console doesn’t, even if the student sometimes opens an educational app on it. General household electronics, extracurricular sports fees not connected to an education provider, and personal expenses are off-limits. Funds can never be refunded or rebated to the parent in cash. Unspent money stays in the account.
Applying and Getting Funded
Applications go through a scholarship organization contracted by the state, not the state education department directly. The typical steps are an online application, proof of residency and the student’s age, income documentation if the state requires it, and a signed EFA agreement committing the parent to spending only on approved expenses and meeting academic accountability rules.
Timelines vary. Some states accept applications on a rolling basis, though applying after the school year begins usually means a prorated deposit rather than the full annual amount. Others use fixed windows. Arkansas opens applications and renewals from March through June 1 for the following school year. Renewal is annual per student; approval does not roll forward automatically.
Once the scholarship organization verifies eligibility and the parent signs the EFA agreement, the first disbursement is released into the student’s digital wallet. Most programs use ClassWallet, which serves as both the payment tool and the recordkeeping system. Parents can spend through a pre-approved online marketplace, pay a registered provider by uploading an invoice, or get reimbursed for out-of-pocket purchases by linking a bank account and uploading itemized receipts. Every transaction is logged and reviewed. Receipts missing the student name, or invoices without an itemized description, get flagged and stall until the paperwork is fixed.
Academic Accountability
An EFA student isn’t in public school, but the state still expects proof of educational progress. Options typically include standardized achievement test results, the statewide assessment, a portfolio evaluation by a certified teacher, or a report card from the private school the student attends full-time.
Deadlines are firm. In programs modeled on New Hampshire’s, the annual record of educational attainment is due by July 15. Miss it, and no additional EFA funds are released until the documentation comes in. The account isn’t canceled, but spending is effectively frozen. The scholarship organization collects these records; it doesn’t monitor the child’s trajectory. That responsibility stays with the family.
What Happens If Funds Are Misused
Accidental misuse, like buying a non-qualifying item in good faith, generally means the parent returns the money to the account after the transaction is flagged.
Intentional misuse is treated differently. If the scholarship organization suspects deliberate fraud, it is required to freeze the account immediately pending investigation. Actions treated as intentional misuse include any deliberate act to defraud the program, misappropriation of supplies or equipment purchased with EFA funds, and knowingly misrepresenting financial information on the application. Substantial intentional misuse can lead to permanent termination and a bar from the program. In serious cases, the scholarship organization must notify the state department of education, the state board of education, and the attorney general, and refer the matter to law enforcement if the amount crosses a criminal threshold. Those reporting duties are written into the statutes governing the program.
Taxes and Unused Funds
EFA deposits are generally not treated as taxable income to the parent or student. They function as state grants restricted to educational use, which keeps them out of the household’s gross income, and families don’t need to report disbursements on their federal returns unless a separate state law says otherwise.
Rollover rules depend on the state. Some programs let balances carry forward year to year until the student ages out or the account closes. Arkansas allows families to retain up to $20,000 or three times the annual allocation, whichever is greater. When the account eventually closes, whether from graduation, age-out, or withdrawal, any remaining balance returns to the state’s education fund rather than the family.
If Your Child Has an IEP
Families of students with disabilities face the highest-stakes version of this decision. An EFA can pay for occupational, speech-language, behavioral, and physical therapy from licensed providers, and students with disabilities often receive a larger annual deposit than the base amount.
The trade-off is that leaving the public school system means leaving behind the local district’s obligations under the Individuals with Disabilities Education Act. A student with an Individualized Education Program in public school has a legal right to a free appropriate public education, including specialized instruction, related services, and procedural safeguards enforced by federal law. Once the student exits the district to use an EFA, that obligation ends. A private school or homeschool setting funded by the EFA is not bound by the same requirements. Some states also note that EFA students do not retain the same right to access their resident public school’s curricular and extracurricular programs that other non-enrolled students might have.
Before enrolling, compare the full cost of privately arranged therapies and specialized instruction against what the district currently provides at no charge under the IEP. Even with differentiated funding, the EFA deposit may not match the value of the services already in place. This is the calculation that most often decides whether the account is a good fit, and it is the one families most often skip.