Education Savings Accounts are a frequent topic of debate, and with that comes a great deal of misinformation. Here, we address some of the most common myths and provide the factual context you need to understand the landscape.
Myth: ESAs are the same as 529 college savings plans.
Fact: This is the most common confusion. State-funded K-12 ESAs are scholarship programs funded by the government for immediate K-12 expenses. 529 Plans are private investment accounts that you fund with your own money to save for future college costs.
Myth: ESA funds can be saved for college.
Fact: Generally, no. Most state-funded K-12 ESAs are intended for current-year educational expenses. While some programs have limited rollover provisions, they are not designed for long-term college savings like a 529 Plan. Arizona is a notable exception with more flexible long-term savings rules.
Myth: ESAs take money from public schools.
Fact: This is the core of the fiscal debate. Proponents argue that ESAs can save states money because the scholarship amount is often less than the total per-pupil cost in a public school. Critics argue that they divert funds that could otherwise support public schools, especially when they fund students who were never in the public system to begin with.
Myth: Only wealthy families benefit from ESAs.
Fact: This depends heavily on program design. Many targeted programs are exclusively for low-income families or students with disabilities. In universal programs, the data is mixed. Some analyses show heavy use by middle-income families, while others point to disproportionate benefits in wealthier areas. Our data for states like South Carolina and Utah shows that when programs are capped, they overwhelmingly serve low-income families first.