A New Growth Frontier for Vendors

The momentum behind private school choice continues to grow, fueled by looser eligibility requirements for families, increased funding, and more flexible spending options.

One particularly fast-growing choice model is the rise of Education Savings Accounts — state-funded programs that provide qualifying families with taxpayer money to use for approved educational expenses.

Proponents say the idea is to give parents more control – and extra money in their pockets – so that they can customize their children’s learning experiences to their needs.

In many states, those programs are reshaping what the education marketplace looks like, as traditional sources of funding directed to school districts get squeezed.

Private school choice programs like ESAs – often called vouchers – are controversial. Public school advocates say those programs siphon valuable funding and enrollment from their schools that rely on taxpayer support, and that private schools are not held to many of the same accountability standards as their public sector counterparts.

But those questions aside, some education company officials, and organizations that support and monitor the growth of private school choice say that ESA programs open the door to a growing, flexible, consumer-driven market.

“This is an opportunity to bring our products to more people, regardless of their ability to pay out of pocket — which has a positive impact on who we can reach,” said Ben Kornell, CEO of Art of Problem Solving, which provides math educational resources and online courses.

“For companies who are natively B2B, this may require a bit of a different muscle to pitch and connect your product to the needs of parents. But it’s also a new way of selling that doesn’t require the approval layers and bureaucratic processes of school districts,” he added.

Kornell also serves as co-founder of EdTech Insiders, an organization that seeks to share information and build connections among the ed-tech community. From his work there, he said he’s seen companies that, two years ago, thought of ESA sales as a nice-to-have, but now see them as critical for the future of their businesses.

Companies’ attraction to private school markets is based partly on the potential they see for new sales to a different audience. But some of it is also rooted in their awareness that the dynamics of selling directly to school districts is “increasingly tough,” Kornell said.

The Trump administration, for instance, has gutted many federal education programs. It has also threatened to cut Title I funding to states and school systems that are out of step with the administration’s opposition to diversity, equity, and inclusion efforts.

There are now 23 ESA programs in 18 states, with Texas launching the nation’s largest universal ESA program in April, according to data from Bellwether, a nonprofit education advisory firm.

Bellwether data shows that ESAs have grown faster than earlier forms of voucher programs did in their infancy during the early 1990s, and that support for these programs is high across different races, political affiliations, and educational levels.

Despite their growth, ESAs account for a relatively small share of overall K-12 funding. They received $3.2 billion in funding in FY2024, less than 1% of all state education funds, according to Bellwether.

Though that represents a small percentage of the education market, some education companies and private school officials are confident the market will grow because political support for the programs has increased.

And vouchers may soon get a major boost at the national level. Republicans who control Congress are pushing a sweeping legislative package that would provide $5 billion in annual tax credits for scholarships and related expenses at private schools.

President Donald Trump, who backs private school choice, is pressing lawmakers to approve the legislation that includes the measure.

A Move Toward Universal Access

School choice programs have historically targeted specific groups of students who may otherwise be unable to access private education, like those with disabilities, or those who come from low-income backgrounds or low-performing schools.

But Republican majorities in state legislatures have gradually expanded to universal eligibility for some of these programs. In 2021, West Virginia launched the first universal Education Savings Account, opening access to any student regardless of income or other restrictions.

The amount allocated per student for ESAs varies by state and is designed to support alternative education choices, such as private school tuition, homeschooling, or tutoring.

“Most of the policies are not in legislation, but administrative rules,” said Doug Harris, director of the National Center for Research and Education Access and Choice. That means for vendors trying to gauge specific state ESA rules, “it’s a moving target.”

While parents can use the funds for a variety of educational expenses — like tutoring, computers, curricula, online educational programs, extracurricular activities, or services for students with special needs — the eligibility of an array of other products can vary. Vendors will have to look closely at each state’s specific guidelines.

Most states have outsourced the management of ESA programs to scholarship-granting organizations, which are responsible for approving vendors, and have created marketplace platforms for families to explore and rate available programs.

Some states, like Arizona, also have a dedicated staff within their department of educations to manage ESAs. Those staffers are responsible for reviewing purchase requests and asking whether they’re for legitimate educational expenses.

To avoid backlogs, the department of education in Arizona will approve requests for up to $2,000. After that, requests are subject to risk-based auditing. Any requests that are denied or flagged for review can go through an appeals process, said Doug Nick, communications director for the department.

Most of the requests coming in are for supplemental educational materials, like art supplies or educational software, Nick said, and the department publishes quarterly reports on its website detailing the award amounts and approved expenses.

Requirements for vendors approved to work with ESA programscan look different across states. Some mandate that companies have been in business at least three years, while others have ambiguous requirements, such as demanding that participating organizations “demonstrate fiscal soundness,” said Colyn Ritter, senior research associate for EdChoice, a nonprofit that supports school choice.

“That’s probably an area where people probably run into issues – with it being super vague,” Ritter said. “But the states have an incentive to allow many vendors to apply and not make the barrier to entry super-high.”

“If a vendor has all the documents that they need, and they’re meeting all the criteria that’s [spelled out by] the state, they shouldn’t have too big of an issue becoming approved,” he added.

State departments of education, many of which have offices dedicated solely to the implementation of their ESA programs, are usually responsive to answering questions, whether it’s about parent reimbursements or vendor applications, Ritter said.

Most states with robust ESAs have “detailed and outlined” processes for answering participating companies’ questions, he said.

Although there has been debate within state approval processes over what constitutes a legitimate educational expense eligible for ESA funding — with products such as Legos, trampolines, or musical instruments facing scrutiny within state departments of education —rules vary by state and are still being refined, Ritter said.

Products are ultimately judged on whether they contribute to students’ success. However, instances of families trying to get unconventional products approved are rare, he added.

Most of the vendors, for now, who get the state’s green light tend to be the “ones that you’d expect: tutoring, specialized services, textbooks, curriculum, things like that,” Ritter said.

What Products Are ESAs Paying For?

When it comes to what families are actually purchasing with the ESA dollars, what’s gaining traction are the providers focused on a single academic subject or area of expertise, said Travis Pillow, senior director of thought leadership and growth at Florida’s Step Up For Students, a nonprofit that provides students with scholarships.

Interest in “unbundling” children’s education is growing, Pillow said, and parents are looking for flexible ways to use academic resources in an à la carte style – piecing together content from multiple vendors who specialize in their subject matter.

Parents are looking for the providers who “focus on one thing and do it well,” he said.

Using ESA funds for high-intensity online tutoring platforms is also particularly popular among parents, EdChoice’s Ritter said.

Student academic struggles that emerged in force during COVID have persisted. For many parents choosing tutoring and other interventions, the “online delivery aspect is key,” he said, because it allows students to learn from home, on their own schedule.

ClassWallet is a digital wallet platform that helps manage and disburse public funds for educational expenses. As the procurement vendor that many states use, the organization has insights on how ESA funds move through their system.

The platform entered the ESA market in 2017, and to date, it says it has delivered about $2 billion in funding to almost 200,000 families.

According to data it has collected from about a dozen states, roughly 58% of funds get spent on tuition. About 9% is used for tutoring, while 7% goes toward therapy and related services. The remaining 26% falls under the broader category of educational goods and services.

The top-tanking category by dollar amount spent is technology – things like laptops, desktop computers, or iPads, said Jamie Rosenberg, founder of ClassWallet, which has been integrated into almost 200 education vendors’ platforms as a form of payment.

The second-most popular purchase by dollars spent is on curriculum and books, and the third is for supplemental resources —things like games, puzzles, manipulatives, and more.

By sheer volume — the number of actual items purchased — the most popular uses are for literacy and books, followed by supplemental learning resources, and then art supplies.

Those purchases reflect what parents see as the most urgent needs for their children, and they aren’t likely to change soon, said Harris, of the National Center for Research and Education Access and Choice.

For companies with products that have not been given states’ blessings for purchase through ESAs, they need to remember that parents are the drivers here, Ritter said.

“If they want it, they will [get you approved] because parent engagement and empowerment – that’s what’s really driving” these programs.

A Shift to B2C Marketing

The need to reach an entirely new set of customers – parents, rather than school district officials – creates challenges and opportunities for education companies, such as a move toward making products available through direct-to-consumer sales channels.

According to ClassWallet’s Rosenberg, families with access to these funds are “spending them in a traditional consumer-like fashion.” That means they’re looking to places like Amazon for the best and most affordable products.

Education companies, especially those who traditionally sell to school systems, can pivot by offering a subset of content catered specifically to ESA programs. From there, they can build their capacity to acquire customers and gain insights from that data to further invest back into their B2C infrastructure, Rosenberg said.

Vendors can also build APIs to plug into checkouts, similar to traditional e-commerce sites that accept Google Pay or Apple Pay. That allows them to easily accept ESA funds and to transform their B2B sites into accessible experiences for parent consumers, he added.

As they pick and choose among products, families want to see something that looks educational and fun, said Diana Hughes, vice president of learning science and design at Age of Learning, which offers its ABC Mouse and My Adventure Academy programs for ESA reimbursement.

Parents want products that are engaging for children and easy to use, and they want assurance that the educational quality is high and that it’s coming from a trusted vendor, she said.

The key is to be clear and concise when marketing to families and making a case about the research supporting your product, Hughes said.

Language used in teacher-focused instructional materials tends to be more technical and pedagogical. But if a product is being marketed to parents through an ESA, it has to be accessible to families from many backgrounds, with different levels of familiarity with academic resources.

“Parents don’t always quite know what they’re looking for,” Hughes said. “You need to be really forward about the benefits you offer.”

That clarity of messaging is especially important because word of mouth recommendations will play a large role in how parents hear about products – as those person-to-person testimonials do among school district buyers, she added.

Parents are more likely to say, “‘I trust that because my other mom friends have told me about it.’” Hughes said. In a school setting, “it’s, ‘Show me your efficacy research, show me your standards coverage’ – it’s much more regimented in box-checking.”

With families, “it’s easier to speak directly to them,” the Age of Learning official said.

She believes the standards for selling to parents can raise the overall bar for educational products.

“You don’t have that expert teacher sitting next to you [using the product] as a fallback,” she said. “Home educators are certainly attentive and want to help, but they’re not quite as equipped to give support at the same level, meaning the product really has to work.”

There’s opportunity here for companies selling within ESAs to differentiate their products to connect with individual students’ needs, said Kornell, of Art of Problem Solving. That individualization, he said, is harder when selling to a whole class or a whole school.

It’s also important for vendors to remember parents may be choosing ESAs because traditional schools have not worked for them, during COVID and in the years that followed, Kornell said.

That means vendors would be wise to find creative strategies to support parents, treat them as co-learners, and understand their needs, he added.

ESA families are “taking their child’s education very personally – that’s why they’re in the program,” Kornell said. “You’re marketing to a niche audience that is interested in their kid’s academic success.”