How Many Families Would Use 'Education Savings Accounts'? It's Hard To Say

By Ethan DeWitt

As lawmakers have debated the creation of education savings accounts, they’ve grappled with another unknown factor: how quickly the program might grow over time. (Getty Images)

The proposal is closer than ever to reality: “education savings accounts” in New Hampshire.

The program would allow parents to withdraw their child from a public school and take the grant money the state provides to that school with them. The money, which would range from $4,000 to $5,000 per year, would be put into an account and be available for families to spend on private school tuition, homeschooling materials, computers, internet, or other services.

Now, as the years-long effort by Republicans to launch the program comes closer to fruition – supported by Gov. Chris Sununu and added to the budget this month by the Senate – advocates on both sides continue to disagree over one key area: How many families will jump aboard?

The question isn’t trivial. Too many families participating could lead public school districts to suffer unsustainable funding losses when children leave and take the funding with them, opponents argue.

Too few participating could mean the program isn’t reaching enough students, proponents say.

For now, the question is hard to definitively answer. There are few savings account programs in the U.S. with the same structure as New Hampshire’s proposed idea to compare.

A modeling analysis carried out by the New Hampshire Department of Education in January projected that this year’s proposed program would have a take-up rate of 28 students in its first year, 677 in its second year, and 3,126 in its third.

But those numbers are based on a 22-year old program in Arizona, which had different eligibility rules when it started – as well as more private education opportunities for families.

But there is one existing scholarship initiative in the Granite State that could give some clues.

Since 2012, New Hampshire has authorized an “education tax credit” program, allowing families whose incomes are under 300 percent of the federal poverty level to access multi-thousand-dollar scholarships to pay for alternative education, such as homeschooling and private schools.

Currently, two nonprofit organizations oversee the distribution of those scholarships: The Children’s Scholarship Fund, a subsidiary of a New York-based national group, and the Giving and Going Alliance.

The scholarships are funded by tax-privileged donations by businesses, which can use up to 85 percent of the donation amounts to offset their business tax liabilities.

The eligibility requirements for the scholarship program are nearly identical to those of the proposed savings account program.

“In terms of the take up rate . . . looking at the number of children who take up the education tax credit scholarship program might be a good bellwether in determining the adoption rate,” said Christina Pretorius, policy director at Reaching Higher, an education policy nonprofit in Concord.

It’s not a perfect comparison, analysts on both sides of the debate say. But it could provide a helpful metric.

Who is interested?

From the start, the education tax credit program was tailored toward middle- to lower-class families.

But the families that actually chose to leave public school and take up the scholarships share similar backgrounds and circumstances, according to Kate Baker Demers, executive director of the Children’s Scholarship Fund.

The first group was students who were bullied or discriminated against in their schools and wanted a change in environment. “That was the biggest one, why people would come to us,” Baker Demers said in an interview.

There were some parents concerned about the academics in their schools. Some children were learning above the grade levels in the class, others below it. Some parents wanted smaller class sizes.

And there were families of students who needed special education and weren’t satisfied with their districts.

Even among that spread of groups, the number of interested families has remained relatively low.

In 2018 and 2019, the last years for which data is available through the Department of Revenue Administration, the Children’s Scholarship Fund distributed 306 total scholarships. In 2020, the fund passed out 625, Baker Demers says.

As for the income profile of those who take the scholarships, data that is available suggests participants are spread among those close to poverty and those in the lower middle class.

Of the families participating in 2018 and 2019, all of them had to make below 300 percent of the federal poverty level: $77,250 for a family of four in 2019.

Of the new students entering the scholarship program directly from public school that year, about half – 53 percent – came from families that qualified for free or reduced lunch, meaning their household income was below $47,637 for a family of four.

For those students who were continuing the program from the year before, 64 percent fell below that $47,637 line.

Taken together, the data from the current program suggests a low take-up rate, with more interest among lower-income families.

But there are factors in the newly proposed program that could drive a bigger take-up rate, some say.

The education savings account program would not be capped by the number of donations in a given year. And the payout would be bigger. While the Children’s Scholarship Fund awards typically vary between $1,000 and $5,000 per family, the education savings account grants would be based on the school’s adequacy funds, which start at around $3,700.

The new savings account program also contains a wider door for private school students. Where the scholarship program is limited to students leaving public schools, the new program would allow students already in private school to take advantage of the funding as well.

That could lead to higher interest from more families.

“That’s what we envisioned when we did our analysis: We assumed that the take-up rate would be higher,” Pretorius said. “Our fiscal analysis assumes that half of the current private school and homeschool students would take up a voucher.”

About 16,294 students in New Hampshire attended private school in 2021, according to the state Department of Education.

One more factor could drive up interest: the ability to combine programs. Under the proposed savings account bill, families could theoretically benefit from both the existing scholarship funds and the new education savings accounts, bringing up the total potential amount of their grant to almost $10,000.

Slow but steady growth

As lawmakers have debated the creation of education savings accounts, they’ve grappled with another unknown factor: how quickly the program might grow over time.

If the existing scholarship program is any indicator, it might not be exponential.

Back in 2016, the number of children in the program was 120. This year, the number of scholarships offered will hit 750, Baker Demers said.

But while the percent increase has been significant, the pace has been gradual, she said. There have been no major rushes to sign up for the program, even as the concept of “school choice” has entered the public’s awareness.

Some children came into the program via word of mouth. Others were recommended toward the scholarship program by social service organizations, such as the Boys and Girls Club.

“It started out really small . . . and it’s been steadily growing since then,” Pretorius said.

Meanwhile, the donated money has been gradually rising too. The Legislature has helped with that. In 2018, Republican lawmakers expanded the business tax credit program to include individual donors, allowing investors to get tax credits against the interest and dividends tax if they donated.

“It’s been like slowly adding 100 kids a year or so,” Baker Demers said.

The slow but steady increase in participation for New Hampshire could create a template for a proposed voucher-like program in New Hampshire. But 2020 has changed things.

A pandemic-fueled boom

The calls to Baker Demers in March 2020 started nearly as soon as Gov. Chris Sununu announced his executive order shutting down schools.

With physical public schools closed, many parents sought out private schools and programs that were still open to in-person instruction.

By summer, the Children’s Scholarship Fund had been flooded with far more applications from families than it had funding for.

In all, around 800 families had to be turned down for the year, Baker Demers said.

“This pandemic has caused a direct uptick in the number of people that want to do something else,” Baker Demers said.

The pandemic caused some parents to seek out in-person learning. Other parents opted to take the at-home learning into their own hands. Interest in scholarships for homeschooling doubled, she said.

The sudden burst in interest in scholarships during the worst moments of the COVID-19 pandemic poses new questions for the proposed education savings account program.

Last year’s increase could have been a one-off occurrence, set off by desperate parents nervous about juggling at-home children. But it also could be a turning point for some families interested in leaving public education.

So far, some signs point toward the latter reality: Many of the parents who signed up for an education scholarship in 2020 due to the pandemic are planning to continue in those scholarships, even as the public schools reopen, Baker Demers says.

“It’s really interesting: The public sentiment is different,” she said. “We’re looking at things differently.”

Still, once schools return to pre-COVID normalcy, things could change. Whether a new crop of parents would follow suit should the educational savings account bill be signed into law this month is just one more unanswerable question.

Baker Demers said she isn’t making any predictions.

“The answer of course is, I don’t know what it will look like,” she said. “I don’t know how many people will want it. I don’t know what it will look like. I can tell you what it looks like in other states, but I don’t know what it will look like here.”