Education Industry Eyes Opportunities in ‘No Child’ Law

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The for-profit K-12 education industry is slowly gaining strength, despite being battered recently by a weak economy, state revenue shortfalls, and growing controversy over the federal No Child Left Behind Act, industry observers said last week.

Companies in the K-12 education sector saw their revenues grow 2.7 percent last year, to $50.1 billion, according to Eduventures Inc., a research firm in Boston that tracks for-profit education businesses. In 2002, the K-12 sector had only a 1 percent increase in revenues from the previous year.

The for- profit higher education sector grew at a much faster rate of 10.5 percent in 2003, generating about $25.4 billion in revenue.

Some education industry observers at a conference here last week expressed cautiously bullish views. Steven Pines, the executive director of the Education Industry Association, the Washington-based group that sponsored the conference, pointed to Eduventures figures that the total preK-12 and higher education sector has hit the $1 trillion mark in annual spending, second in size only to the health-care industry, and represents 10 percent of the nation’s gross domestic product.

An estimated 15,000 for-profit education businesses exist now across the United States, said Mr. Pines. And as the number of businesses serving schools has grown, so has membership in the EIA.

In the early 1990s, the trade group’s membership was small, "mostly retired teachers who wanted to start their own business on the side," he said. Membership now exceeds 800, representing school management companies, charter school providers, postsecondary institutions, and content providers.

One major reason for the growth is the No Child Left Behind law, which has generated opportunities for companies in areas such as supplemental education services, assessment, and professional development, Mr. Pines said.

Under the federal law, for instance, schools that fail to make adequate yearly progress in student achievement over time must set aside a portion of their Title I budgets to allow children to transfer to other schools or to receive after-school tutoring. Private companies make up a majority of approved providers of supplemental services under the No Child Left Behind law, according to the U.S. Department of Education.

"Schools are looking for improvements in overall efficiency," Mr. Pines said. He pointed out that attendance at the conference had doubled from last year.

One attendee was Kelley Brock, the chief executive officer of the National Center for Training and Educational Assistance, a Washington-based company that trains tutors and teaches them how to build their own businesses.

"This is a new era in education," Ms. Brock said during a conference break. "The Education Department sees that there is an opportunity for private providers in [the federal law]."

Hitting Barbershops

Still, the enthusiasm at the conference was tempered by concerns that school districts in many cases are failing to adequately communicate to parents opportunities to enroll their children in free tutoring. The inadequacy of district outreach efforts is one reason fewer than a quarter of eligible students are using supplemental education services under the federal law, studies have found. ("Tutoring Aid Falling Short of Mandate," Feb. 25, 2004.)

Nina Shokraii Rees, the deputy undersecretary in charge of the Education Department’s office of innovation and improvement, said implementation of the tutoring provision was off to a good start, but she acknowledged that problems exist.

"You’re putting the fox in charge of the henhouse," she said of some districts’ reluctance to promote the supplemental- services provision. "We hope that they’re meeting the letter of the law, but to expect more is unrealistic."

The environment for private tutoring companies remains challenging but is slowly improving, said Timothy C. Thompson, the director of new business development at Sylvan Education Solutions, a company that tutors more than 25,000 students under contract with states and school districts. The company is part of the Baltimore-based Educate, Inc. He noted that 44 states have published approved tutoring-provider lists.

Gene Wade, the president of New York City-based Platform Learning Inc., which provides tutoring to 10,000 students in 15 states, said there is often a "disconnect" between districts and parents.

"Districts aren’t used to treating parents as clients," he said. He advised conference attendees to market directly to parents. He pointed to his company’s practice of going to churches, barbershops, and hair salons, as well as schools, to find parents and local education supporters.

"We’re doing grassroots mobilization," Mr. Wade said. "On the ground, there’s a lot of room here for [supplemental services]."

Vol. 23, Issue 30, Page 13

Published in Print: April 7, 2004, as Education Industry Eyes Opportunities in ‘No Child’ Law
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