The number of states with education choice programs has been trending progressively upward over the last two years, with at least 36 states having considered education savings account (ESA) legislation in 2023 and 13 states implementing programs.

As ESAs grow in popularity, it’s critical that the funding is managed properly to ensure that parents and students can easily access what they need, that administrators can provide proper oversight and that the public has transparency into how tax dollars are used. To that end, it’s instructive to take a step back to better understand these programs and the processes around them.

An Historical View of ESAs

Considered by some to be the new frontier of education choice programs, ESAs expand educational opportunities by giving parents access to a portion of their child’s education funding. Program guidelines vary, but in all programs, policymakers approve and appropriate funding for program administrators to distribute to participating students. Depending on program rules, the parent can then use the funds to pay for the student’s educational expenses, including private school tuition, tutoring, curriculum, online programs, technology and educational therapies.

Some programs allow funds to be used for vocational programs (Arizona’s Empowerment Scholarship Account) and individual classes or extracurricular activities provided by public schools (South Carolina’s Education Scholarship Trust Fund). Program eligibility also differs from state to state, with the earliest programs focused primarily on providing educational options for students with disabilities and later expanding to include students in low-income households, attending D- or F-rated public schools, active-duty military families, etc.

The original method of providing access to ESA funding was through the use of debit cards or reimbursing parents for eligible expenses. Both methods pose challenges. Debit cards offer limited oversight, increase the risk of misuse and fraud, and make programs challenging to administer. The detailed recordkeeping and receipt collection required can also be burdensome for families. On the other hand, programs that only offer reimbursement are inefficient and inequitable as many families cannot participate in a program that requires them to pay upfront and out-of-pocket for educational expenses.

Introducing Technology to Increase Access and Accountability

A more feasible option for ESA funding disbursement is through the use of digital wallet technology. A digital wallet gives a participating family a virtual representation of the funds available to spend through an easy-to-use platform. Families can access a digital wallet using a computer or mobile device and can use the funds to make purchases and payments. Digital wallets replace physical cards and allow families to access and utilize their scholarship funds on one platform, in real time, through program-approved vendors.

Program administrators can set rules with digital wallets around purchases to avoid the misuse of funds, helping program administrators comply with legislative requirements and easily track where dollars are spent. The technology provides administrators with real-time tracking and reporting options. Real-time transaction tracking and digital record-keeping consolidate account data into one place, streamlining audit reporting, compliance and transparency.

One example of a digital wallet providing increased access and accountability is New Hampshire’s Children’s Scholarship Fund (CSF-NH). With a digital wallet, CSF-NH has distributed over $44M in funding to over 6,000 students. Since the program works with low-income families, the digital wallet solution helps maximize the program's impact by making funding more accessible. The CSF-NH team is able to manage compliance, knowing that the funds are going to the right people and are being used for the right purpose.

Ensuring ongoing success

ESA programs administered with digital wallets are successful because they meet the needs of all stakeholders. Policymakers see the programs are administered efficiently, effectively, and transparently. Program participants can access resources directly without needing reimbursement or independently retaining receipts. State administrators have on-demand access to real-time reports that are vital to the transparency the public demands. Meeting these stakeholder needs will allow current programs to thrive. When existing programs thrive, replication and expansion – perhaps to other states or widened eligibility within a state – is a more straightforward lift.

ESA programs are growing in popularity. The sustainability of existing programs and the enactment of new ESA programs are dependent upon their success today. Digital wallets play a pivotal role in this success.

About the author

Sarah Raybon is ClassWallet’s Senior Director of Strategic Initiatives and in-house ESA expert. Sarah brings 15+ years experience working with ESA families and service providers.

Prior to joining ClassWallet, Sarah was the Director of Communications and Engagement at the Arizona Department of Education where she helped administer the country’s largest ESA program for almost two years, including through the launch of universal eligibility. Previously, Sarah has worked to expand educational opportunities through Prenda Microschools, the Arizona School Tuition Organization Association, and the American Federation for Children. In addition to her policy and administrative experience, Sarah is also a longtime ESA parent and is keenly aware of the nuanced needs of ESA parents.