The for-profit K-12 education industry is gradually gaining strength, despite recent struggles due to a weak economy, state revenue shortages, and ongoing controversy surrounding the federal No Child Left Behind Act, industry experts revealed last week. According to Eduventures Inc., a Boston-based research firm that monitors for-profit education businesses, companies in the K-12 education sector experienced a 2.7 percent increase in revenue last year, reaching $50.1 billion. This marks a significant improvement from 2002, when the sector only saw a 1 percent revenue increase.
In contrast, the for-profit higher education sector fared much better, with a growth rate of 10.5 percent in 2003 and revenue of approximately $25.4 billion.
During a recent conference, education industry experts expressed cautiously optimistic views. Steven Pines, executive director of the Education Industry Association (EIA), the Washington-based group that organized the conference, highlighted Eduventures’ data revealing that the total spending on preK-12 and higher education has reached $1 trillion annually. This places the education sector as the second-largest industry in terms of size, trailing only healthcare. Additionally, the sector accounts for 10 percent of the nation’s gross domestic product. Mr. Pines stated that there are now an estimated 15,000 for-profit education businesses operating in the United States, and as the number of businesses serving schools increases, so does membership in the EIA. Initially, the EIA had a small membership consisting mainly of retired teachers seeking to start their own businesses on the side. However, membership has now exceeded 800, representing various entities such as school management companies, charter school providers, postsecondary institutions, and content providers.
One significant factor contributing to the industry’s growth is the No Child Left Behind Act, which has created opportunities for companies in areas such as supplemental education services, assessment, and professional development. Under the federal law, schools that fail to make adequate yearly progress in student achievement must allocate a portion of their Title I budgets for children to transfer to other schools or receive after-school tutoring. The majority of approved providers for these supplemental services are private companies, according to the U.S. Department of Education. Mr. Pines noted that schools are seeking overall improvements in efficiency, which has resulted in increased attendance at conferences like the one he organized.
However, the enthusiasm at the conference was tempered by concerns that school districts are often failing to effectively communicate opportunities for parents to enroll their children in free tutoring. Studies have indicated that insufficient outreach efforts by districts are one of the reasons why less than a quarter of eligible students are taking advantage of supplemental education services under the federal law. Nina Shokraii Rees, the deputy undersecretary for the Education Department’s office of innovation and improvement acknowledged that while the implementation of the tutoring provision is off to a good start, there are problems that need to be addressed.
Despite the challenges, the environment for private tutoring companies is slowly improving, as highlighted by Timothy C. Thompson, director of new business development at Sylvan Education Solutions, a company that provides tutoring to more than 25,000 students through state and school district contracts. Thompson mentioned that 44 states have published lists of approved tutoring providers. Gene Wade, president of Platform Learning Inc., a New York City-based company that offers tutoring to 10,000 students in 15 states, emphasized the need for districts to prioritize parents as clients and advised conference attendees to directly market their services to parents. He shared his company’s grassroots mobilization strategy, which involves reaching out to parents and local education supporters not only at schools but also at churches, barbershops, and hair salons.
Given the current landscape, it is evident that there is ample opportunity for the growth of supplemental education services in the education industry.
