The Effect of Taxpayer-Funded Education Savings Accounts on Private School Tuition: Evidence from Iowa

Does state implementation of Education Savings Accounts (ESAs), which are voucher-like taxpayer-funded subsidies for children to attend private schools, increase tuition prices? We analyze a novel longitudinal dataset for all private schools in Iowa and Nebraska, neighboring states that adopted ESAs in the same legislative session, with Iowa’s implementation beginning first. By leveraging state and grade-level variation in eligibility, we provide new causal evidence that ESAs led Iowa private schools to increase tuition. Increases varied by the percentage of the grade eligible for ESAs. When eligibility was universal (kindergarten), private schools increased prices 21-25%, compared with 10-16% in grades with partial eligibility. In contrast, private schools did not increase tuition in pre-K, which was ineligible for ESAs. If a goal of ESAs is to extend private school access to new families, the substantial tuition increases they produce may limit access.