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119-hr-10801119th CongressWALLET

School Freedom Act of 2026

Sponsored By: Representative Mace, Nancy [R-SC-1]

Introduced

Summary

This bill would redirect federal K–12 grant funding into Treasury‑managed School Freedom Accounts for individual students and would terminate covered federal elementary and secondary education programs by June 30, 2027.

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  • Families and parents would get a per‑pupil federal deposit into a School Freedom Account starting with the school year beginning July 1, 2027. Parents could use the accounts for private school tuition, homeschool curriculum, tutoring, technology, extracurriculars, testing, evaluations, and could add funds via a payment card or pre‑tax payroll deposits under IRC section 530B.
  • Children with disabilities would receive a $2,000 add‑on in 2027 that is indexed to inflation thereafter. SFA funds may pay for educational therapies, evaluations, assistive technology, and related services.
  • Covered federal K–12 grant programs would end and unobligated balances may be redirected to SFAs; if a parent does not notify or approve disbursement, federal SFA funds default to the local educational agency. SFAs convert to tax‑favored Higher Education and Skills Obtainment Funds at secondary completion or age‑out, and nonqualified HESOF withdrawals carry a 20% penalty for the first and 50% for subsequent withdrawals with possible criminal penalties after the third; Treasury must track deposits and the Government Accountability Office will report on implementation.

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Bill Overview

Analyzed Economic Effects

5 provisions identified: 0 benefits, 1 costs, 4 mixed.

Who can open a school account

If enacted, an individual would qualify for a School Freedom Account only if all four rules are met. The child must not have finished secondary school and must be eligible, or soon eligible, to attend elementary or secondary school. The child must be a U.S. citizen or national and must have at least one parent who is a U.S. citizen or national. This eligibility rule would apply upon enactment.

Tax rules for school and college funds

If enacted, employer deposits to an employee‑parent's account would be excluded from the income of the employee and the beneficiary for tax years after enactment. Parents would be able to deduct contributions they make to a School Freedom Account. Distributions used only for qualified SFA or HESOF expenses would be tax‑free. Distributions not used for qualified expenses would be taxable to the beneficiary and would trigger an extra tax: 20 percent for the first nonqualified distribution and 50 percent for later nonqualified distributions. For a third nonqualified distribution, the bill would also allow criminal penalties of up to one year in prison for that distribution. Special rules and some exceptions would apply for distributions by parents for minors, and for death or disability.

Federal school deposits and terminations

If enacted, the bill would end covered federal elementary and secondary education programs by a date set by the Secretary of Education, not later than June 30, 2027. Beginning at enactment, no new federal appropriations could be made for those covered programs. For school years starting on or after July 1, 2027, Treasury would open a School Freedom Account for each eligible child and deposit a per‑pupil Federal amount. The first year's per‑pupil amount would equal (FY2027 SFA appropriations plus amounts transferred under the bill) divided by the number of eligible individuals; later years would use each fiscal year’s SFA appropriation divided by eligible individuals. Each eligible child with a disability would receive an extra $2,000 for the school year beginning July 1, 2027, with later increases tied to the Personal Consumption Expenditures price index.

How families can spend school money

If enacted, families could use School Freedom Account money for many education costs, including books, curriculum, technology, tutoring, private school tuition, public‑school classes, extracurriculars, and disability‑related therapies. Federal money that Treasury sends to a local educational agency would be usable by that LEA for any educational purpose allowed under State law. Treasury would issue rules for how parents notify the agency each year and how to apply for a payment card. The bill would also limit Treasury from requiring preapproval of purchases or forcing families to use a particular website or marketplace, and it would default annual Federal deposits to the LEA if a parent fails to give required notice or approval.

School accounts convert to college funds

If enacted, Treasury would convert a student's School Freedom Account into a Higher Education and Skills Obtainment Fund when the student finishes secondary school or becomes too old for public school. Federal SFA money would become Federal HESOF money and parental SFA money would become parental HESOF money. Each State would choose whether its deposits move into the HESOF or return to the State. HESOFs would pay for college, career training, and other approved postsecondary costs. Treasury would close HESOFs when the person turns 30; remaining Federal HESOF money would return to the U.S. Treasury, while remaining parental HESOF money would go to the individual.

Sponsors & CoSponsors

Sponsor

Mace, Nancy [R-SC-1]

SC • R

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

No roll call votes available for this bill.

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