A June 30 Chalkbeat report put a number on §25F's least-discussed problem: persuading a taxpayer to make a $1,700 credit donation could cost $300 or more in marketing, while the law limits a Scholarship Granting Organization to spending 10% of what it raises, $170 on that gift, on everything that isn't a scholarship. It is not a reason the credit fails; it is the operating constraint that decides which SGOs make it.
The federal Education Freedom Tax Credit (FSTC / ECCA / §25F) is often described as free money: a donor gives up to $1,700 to a Scholarship Granting Organization (SGO), claims the full amount back as a dollar-for-dollar federal credit, and a family gets a scholarship. On June 30, 2026, Chalkbeat's Matt Barnum surfaced the part of that picture the rally cries leave out, and it is the single most important number for anyone thinking about starting or running an SGO: the money is only free to the donor once the SGO has found that donor, and finding donors costs real dollars the credit does not reimburse.
Here is the squeeze in one line. The American Federation for Children, a leading school-choice group, estimates internally that it could cost $300 or more in marketing to persuade a single taxpayer to make a §25F donation. AFC spokesman Brian Jodice put it in industry terms, a target of roughly $1 in spending to generate $5 in donations, which on a $1,700 gift works out to about $340. But §25F caps an SGO at spending 10% of the money it raises through the credit, or $170 on a $1,700 donation, on everything that is not a scholarship. That 10% has to cover staff, technology, audits, legal and compliance work, income verification, and donor acquisition combined. If it costs $300 to land a donor and the whole non-scholarship budget for that donor's gift is $170, the marketing alone is nearly double the entire allowance, before a single other bill is paid.
Not everyone accepts the $300 figure, and the disagreement is itself instructive. Jim Blew, an adviser to the coalition implementing the credit, argued the real cost is closer to $100 per donor, still more than half the 10% cap by itself. Derrell Bradford, president of 50CAN, and Darla Romfo, president of the Children's Scholarship Fund, are among those looking for lower-cost ways to reach donors precisely because the cap makes expensive acquisition unsustainable at scale. The honest read is that nobody yet knows the true first-year number, because the program does not go live until January 1, 2027, and no one has run a §25F donor campaign at volume. What is not in dispute is the shape of the problem: donor acquisition is the largest single threat to a new SGO's budget, and the statute gives it the least room.
The scale is what makes this a national story rather than an accounting footnote. The Trump administration's own projection assumes about 30% of eligible taxpayers, roughly 14 million people, will donate, producing around $24 billion for scholarships. Run the AFC's own $300 figure across 14 million donors and national marketing would run past $4.2 billion, money that by law cannot come out of the credited donations themselves. That is why AFC says it has already raised more than $10 million for a national awareness campaign funded outside the cap: the outreach that fills the top of the funnel has to be paid for with separate, non-credit dollars, because the 10% inside the credit will not stretch to cover it.
For SGO operators, this is the number to build the whole model around, and it points to a clear strategy rather than a dead end. An SGO that spends $300 in paid marketing per donor is structurally underwater; one that acquires donors through channels it does not have to buy, an existing school community, a congregation, an alumni or parent network, a partner nonprofit's list, starts far closer to viable because those donors arrive at little or no acquisition cost. That is exactly why the SGOs best positioned for §25F are often the ones attached to an institution that already has a donor base, and why a brand-new SGO with no built-in audience faces the steepest climb. The other half of the answer is holding down the rest of that 10%: the more of the allowance an SGO burns on manual intake, eligibility checks, receipting, and audit prep, the less is left for finding donors at all. Purpose-built §25F software that automates intake, income verification, donor receipting, and disbursement is one of the few levers an operator controls to keep administrative overhead low enough that donor outreach can fit inside the cap.
None of this is an argument against the credit, and the groups raising it are among its strongest backers, which is the tell that it is an implementation problem, not a fatal flaw. Twenty-eight states are already on the IRS's official roster heading into the 2027 launch (our participation map counts 30, including Kansas and Kentucky, which opted in by veto override but have not yet completed the formal federal filing), and the demand for scholarships is real. But the difference between an SGO that thrives and one that quietly folds in year one will come down to a piece of arithmetic that the “free money” framing hides: cost per donor versus the 10% cap. Operators sizing up whether and how to launch can start with our guide to starting an SGO, see the current national field in the SGO directory, and track where each state stands on the participation map. The credit going live is settled; who can afford to deliver it is the question this number decides.
