Gov. Bill Lee stands with lawmakers after a special legislative session last month that saw passage of the Education Freedom Act, a universal private school choice program. (Photo: John Partipilo for Tennessee Lookout)
This article was co-published with The 74, a non-profit, independent news organization focused on education in America.
Last September, the CEO of a company handling online payments for West Virginia’s private school choice program promised not to seek additional business until he fixed technical glitches that led to a huge backlog of orders.
“Student First Technologies has assured us that they will not pursue contracts with additional states until the issues and challenges we’re experiencing here in West Virginia are resolved. That’s a commitment,” said former Treasurer Riley Moore. His comments came during a board meeting devoted to the state’s Hope Scholarship, an education savings account program that pays for private school tuition and homeschooling.
Well into the current school year, over 3,000 orders were unfulfilled, forcing parents to pay out of pocket for books, tech equipment and services that the state promised to provide. Some families couldn’t even download Theodore, the company’s payment platform.
Four months later, some parents using the Hope Scholarship say not much has changed. They still complain of poor customer service and purchases that are approved for some families, but not others.
“From a parent perspective, performance has not improved significantly,” said Katie Switzer, a mother of five who shared concerns with the state last summer.
In January, others posted complaints on Google’s webstore, where parents can access the payment platform. “Please go back to last year’s system. I still cannot access … TheoPay,” one parent wrote. Another said, “I’ve scanned the cart at least 100 times and the same sentence pops up every time, ‘Something unexpected happened, please resubmit your cart.’”
Despite its promise to West Virginia, The 74 has learned that the Indiana-based company has been pushing to expand. In late fall, Student First submitted an unsuccessful proposal to handle expenditures for Wyoming’s new program.
Now the company could be in the running to manage a statewide ESA program in Tennessee, a prize that would mark a turnaround for a newer player in what has become a fast-growing industry. Student First already manages a small voucher system for about 2,000 students in the Memphis, Nashville and Chattanooga areas. Legislation passed last month would take the program statewide, where it would serve roughly 20,000 students.
The potential for growth, however, raises questions over whether Student First, which lost a $15 million contract to run Arkansas’ ESA program because it failed to deliver on its promises, can meet the demand.
‘Evolving very quickly’
The governor’s office won’t say for sure whether it plans to hold a competitive bidding process. Elizabeth Lane Johnson, the governor’s press secretary, told The 74 Tuesday that the state Board of Education will first have to write rules for the expanded program.
She added that officials have “met with a number of experienced vendors to learn how other states have implemented universal school choice programs successfully.”
Last November, Lee met with a representative from ClassWallet, a leader in the industry, at a conference in Oklahoma City, The Tennessean reported. But Mark Duran, Student First’s CEO, said the situation in Tennessee is “still unfolding” and that he hopes to continue serving the state.
Some observers say it would be unusual for the education department not to open the process up to other bids.
“The technology is evolving very quickly,” said Jim Blew, a former U.S. Department of Education official and ESA advocate who later advised ClassWallet. “I would be really surprised if they don’t open it up to a new competition. They’re scaling up; they’re going universal.”
Honored to join President @realDonaldTrump today at the White House & share how the Education Freedom Act – TN’s Universal School Choice plan – will ensure greater opportunity for students across the Volunteer State.
pic.twitter.com/6WqJVDoGSw
— Gov. Bill Lee (@GovBillLee) January 31, 2025
If some Republicans get their way, red states won’t be the only ones with universal voucher programs. They’ve reintroduced a bill in Congress to create a nationwide tax credit scholarship program. And while details have yet to emerge, President Donald Trump directed the Department of Education to use grant funds to prioritize private school choice.
“We have millions of students right now who live under some sort of school choice program,” KellyAnne Conway, a counselor to the president in his first term, said last month. “We know it’s effective.”
The West Virginia treasurer’s office did not answer questions about whether Student First has caught up with its backlog of orders. But Duran told The 74 “a lot has changed” since last fall.
That’s when Arkansas fined Student First over $500,000 because of delays in delivering a “fully operational” platform. In an Oct. 8 letter canceling the contract, Education Secretary Jacob Oliva told Duran that processing delays meant that students, families and vendors were receiving “service below the standard to which they were entitled.” At the same time, homeschooling parents in West Virginia couldn’t order curriculum, equipment and school supplies for their kids because of problems with the company’s payment system.
A hold-up in funding can be a major setback for small businesses trying to establish themselves in the market.
When Student First still operated in Arkansas, Lauren McDaniel-Carter waited seven weeks after the school year started before her microschool ACRES received payments totaling about $23,000. All but three of the 26 students she serves at her home in northeast Arkansas participated in the state’s Education Freedom Account program. She had to take out a $50,000 loan to run the school and pay her small staff.
‘Larger and more numerous’
The state replaced Student First with Class Wallet, which held the contract during the program’s first year.
Duran, Student First’s CEO, did not respond to specific questions about the status of orders in West Virginia, but said his team seeks to “constantly improve our operations.”
“Momentum remains strong,” he said. “We’ve grown and are ready for even more growth.”
The company now has over 35 staff members and recently hired Andrew Nelms, formerly with school choice advocacy group Yes. Every Kid, as its new head of government affairs. Other new hires include a vice president of operations, a software engineer and a “customer success” director.
The additional personnel, Duran said, will allow the company to “support larger and more numerous programs across the country.”
An entrepreneur, Duran grew up in northern Michigan where his mother taught him while building a large network of homeschooling families. The flexibility, he said, allowed him to spend time with his dad, a homebuilder, and sparked his business career.
He got his start in the private school choice sector in Indiana when he teamed up with a friend who built a software platform for managing donations to tax credit scholarship programs.
Indiana “education freedom policy folks” encouraged them to break into the ESA market, he said. He was further inspired after attending a 2020 ExcelinEd conference in Florida, where he mingled with voucher advocates who saw the pandemic’s disruption as an opportunity to expand private school choice.
“We saw a bigger picture,” he said. Among lawmakers there was a “big push to unlock more money … to send to families through these different programs.”