TEFA Priority Tiers: How the Texas Education Freedom Accounts Lottery Works

Why There's a Lottery at All

TEFA's inaugural $1 billion appropriation sounded enormous — until 274,000 students applied. At the private school base award of $10,474, even half that applicant pool would exhaust the fund. SB 2 anticipated oversubscription and built a four-tier priority system to determine who receives accounts first.

The lottery is not random within the full applicant pool. It's random within each tier, processed in strict order from Tier 1 down.

Year 1 Priority Tiers (2026–2027)

Tier 1: Students with Disabilities Household AGI at or below 500% of the Federal Poverty Level (about $165,000 for a family of four using the 2026 HHS guideline). The child must have a documented disability — an active IEP from a Texas public school district, a Full and Individual Initial Evaluation, or a program-approved proof-of-disability form. Tier 1 applicants are funded first.

Tier 2: Low-Income Students Household AGI at or below 200% FPL (about $66,000 for a family of four using the 2026 HHS guideline). These students don't need a disability designation. After all Tier 1 accounts are filled, Tier 2 is funded next.

Tier 3: Middle-Income Students Household AGI above 200% but at or below 500% FPL. Funded after Tier 2, by lottery within the tier.

Tier 4: Upper-Income Students Household AGI above 500% FPL. SB 2 caps Tier 4 at a maximum 20% of total program funds — $200 million in the inaugural year. Within Tier 4, students enrolled in a Texas public or charter school for at least 90% of the prior school year receive priority.

Income Is Measured by Federal AGI

The Comptroller uses Federal Adjusted Gross Income from your most recent IRS Form 1040 — line 11 on the standard form. Not gross income, not W-2 wages, not household total from various sources. Strictly the AGI figure on the filed return.

This tripped up many families in Year 1. About 25,500 applications were disqualified, largely because applicants submitted pay stubs or W-2 forms instead of the 1040. Non-tax-filers can use the Comptroller's official Income Affidavit as a substitute.

What Changes in Year 2

The priority system restructures after the inaugural year:

Priority 1: Siblings — Siblings of participating children receive first priority. If one child is accepted during an application period, an eligible sibling who applies during that same period is also accepted. This is the strongest priority in the system.

Priority 2: New applicants — First-time applicants are sub-prioritized using the same Tier 1–4 income and disability structure from Year 1.

Priority 3: Returning public school students — Former TEFA participants who returned to public school and want to reapply receive the lowest priority. The program disincentivizes cycling in and out.

The 20% Cap on Upper-Income Families

Tier 4 is not excluded — it's capped. SB 2 explicitly reserves up to 20% of total program funds for households above 500% FPL. At $1 billion total, that's $200 million available for upper-income accounts. The cap limits how many Tier 4 accounts are funded, but the money is there.

Within Tier 4, public school exiters are prioritized. A family pulling their child out of a public district for the first time ranks above a family already homeschooling or in private school.

Practical Implications

Tier placement is based on the Federal AGI reported on the Form 1040 or alternative affidavit submitted with your application. If your AGI is close to a tier boundary, the difference between Tier 2 and Tier 3 can meaningfully affect your odds.

The TEFA Parent Guide includes priority tier scenarios for different family sizes and income levels, plus a worksheet to determine your exact FPL percentage before you apply.

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