Education companies, or “edupreneurs,” areentering the education marketplace in droves withcreative, cost efficient products and services forstudents of all ages. This rapidly expanding indus-try, which constitutes approximately 10 percent ofthe $740 billion education market, demonstratesthat private enterprises, even when competingagainst a monopolistic system, can deliver a widerange of affordable high-quality educational ser-vices. This study provides a glimpse of the prod-ucts, services, and innovations that a fully com-petitive marketplace could generate if the govern-ment’s stranglehold on education were loosened.

For example, Scientific Learning is devel-oping products to help children to over-come speech impediments. DeVry and theApollo Group are making postsecondaryeducation more convenient and affordable,thus reducing some of the barriers that havetraditionally prevented adults from pursu-ing higher degrees. Established companiessuch as Kaplan, which traditionally pre-

pared high school students for standardizedtests, are expanding their educational ser-vices internationally, across age groups, andthrough new media.

Although the marketplace for education ser-vices and products is strong on the margins, thestructure of the American educational systemcreates considerable obstacles for companiesthat would like to offer complete kindergartenthrough 12th grade services: entrepreneursattempting to open schools face regulatory bar-riers and competition from “free” governmentschools supported by state funds.

Policymakers interested in improvingAmerica’s education system should eliminatefinancial biases against edupreneurs by adoptingpolicies, such as tax cuts and universal tuitiontax credits, that would return education pur-chasing power to individuals. Such policieswould begin to loosen the government’s monop-oly on education and allow the natural growth ofa vibrant education marketplace.

“Edupreneurs”A Survey of For-Profit Education

by Carrie Lips

_____________________________________________________________________________________________________

Carrie Lips, a former policy analyst at the Cato Institute, is currently pursuing a master’s degree in public policyat the John F. Kennedy School of Government at Harvard University.

Executive Summary

No. 386 November 20, 2000

Introduction

The failure of government-run schools toprepare students for the rigors of the moderneconomy is a pressing policy problem, but itis also an opportunity for the private sector.Analysts for Merrill Lynch explain:

The education needs of the knowl-edge economy, contrasted with thecurrent system’s inability to fill thoseneeds provide innovative companieswith open-ended opportunities forgrowth. The classic “big investmentopportunity” is a company that has asolution to a problem; the more sig-nificant the problem, the larger theinvestment potential. There is not, inour view, a bigger problem in theU.S. today than the need to bettereducate our populace and hence, wethink the investment potential inthis sector is tremendous.1

Today “edupreneurs” are seizing thatopportunity and developing innovativeproducts and services to fill the vacuum leftby government-run schools. Although thefor-profit sector of the education industry issmall compared with the government-runsector, it is growing.

As Figure 1 shows, the for-profit educationmarket is approximately $70 billion, orapproximately 10 percent of the $740 billioneducation market.2 Overall, Merrill Lynchestimates that the for-profit education mar-ket will grow at a rate of 13 percent per year.3

Many factors have contributed to and willcontinue to contribute to that growth,including (1) businesses’ demands for a morehighly educated workforce; (2) consumers’demand for retraining to keep pace with theevolving workplace; (3) parents’ demands foralternatives to government-run schools; and(4) an expanding market spurred by policyreforms of the 1990s, particularly those thathave encouraged the growth of charterschools and private schools.

Publicly Funded and Not-for-Profit

Education $670 Billion

For-Profit Education $70 Billion

2

“Edupreneurs”are developing

innovative products and

services to fill the vacuum leftby government-

run schools.

Figure 1Market Share of For-Profit Education

Source: Michael T. Moe, Kathleen Bailey, and Rhoda Lau, The Book of Knowledge: Investing in the GrowingEducation and Training Industry, Merrill Lynch & Co., Global Securities Research & Economics Group, GlobalFundamental Equity Research Department, Report 1400, April 9, 1999, p. 25.

The education market can be divided intofive major submarkets: kindergarten through12th grade (K–12), early education and childcare, postsecondary education, corporate andgovernment training, and consumer productsand services. As Figure 2 shows, the size of thefor-profit sector varies by submarket. Forinstance, while the for-profit industryaccounts for the entire $13 billion productsand services market, it receives only 5 percentof the total dollars spent on K–12 education.

Private-sector companies are becominginvolved in all aspects of K–12 education,from managing K–12 schools and creatingteacher-training programs to developingtextbooks and supplemental learning materi-als, but K–12 education is nonetheless themost difficult sector of the education indus-try for companies to enter. Government-funded competition and regulations make itdifficult for companies to make a profit.Those obstacles increase risk for potentialinvestors, thereby depressing the amount ofcapital that would otherwise be available to

edupreneurs. However, as states continue toprovide alternatives to traditional govern-ment-run schools through charter schools,voucher programs, and tax credits, theopportunities for edupreneurs and the easeof entry into this market should increase. Forinstance, Merrill Lynch estimates that, in 10years, 10 percent of all publicly funded K–12schools will be privately managed.4

This paper will provide a snapshot of thecontributions of noteworthy for-profit com-panies in the K–12 and postsecondary educa-tion markets. Policymakers can draw two sig-nificant conclusions from this analysis: First,a private, customer-driven educational sys-tem would offer a wider range of services andproducts than does the government-run sys-tem. Second, the current system impedesprogress in education by erecting barriers toentry to the education marketplace. Policy-makers should level the playing field foredupreneurs by adopting policies, such as taxcuts, universal tuition tax credits, and vouch-ers, that would return spending power to

3

K–12 education isthe most difficultsector of the edu-cation industryfor companies toenter. Government-funded competi-tion and regula-tions make it dif-ficult for compa-nies to make aprofit.

339.5

18.5

229

8

79

19

22.5

11.513

$0

$50

$100

$150

$200

$250

$300

$350

$400

K-12 Postsecondary Training Child Care Products

For-Profit

Publicly Funded and Not-for-Profit

Figure 2Publicly funded and Nonprofit Education Compared to For-Profit Education(billions of dollars)

Source: Michael T. Moe, Kathleen Bailey, and Rhoda Lau, The Book of Knowledge: Investing in the GrowingEducation and Training Industry, Merrill Lynch & Co., Global Securities Research & Economics Group, GlobalFundamental Equity Research Department, Report 1400, April 9, 1999, p. 23.

individuals. Such policies would begin toloosen the government’s monopoly on edu-cation and allow the natural growth of avibrant education marketplace.

Kindergarten–12th GradeEducation

Most national discussions about educa-tional reform focus on kindergarten through12th grade. The K–12 marketplace consistsof more than 116,000 public and privateschools, which served an estimated 53.5 mil-lion children in 19995 at a cost of approxi-mately $360 billion.6 Statistics and anecdotesshowcasing the failure of the government-run schools to educate students adequatelyare commonplace:

At fourth grade (ten years old),American children score better inreading and science than mostpupils in 20 other countries, and areabout average in mathematics. Ateighth grade, they are still slightlybetter than average in math and sci-ence but fall behind in reading. By12th grade, they are behind 95 per-cent of the children in other coun-tries. The longer children stay inAmerican schools, the worse theyseem to get.7

The average grade that parents and thepublic generally give the schools in theircommunity and in the nation at large hasdeclined since 1974 and hovers between Cand C+.8 At the same time, parental and pub-lic support for school choice—that is, allow-ing students and parents to choose a privateschool to attend using tax dollars—has dou-bled since 1991.9 Numerous polls show thatthe majority of voters support this type ofschool choice.1 0

Dissatisfaction with public schools andsupport for alternatives are manifest not justin polls but in reality: witness the tremen-dous growth over the past decade in charter

schools, publicly funded voucher programs,tuition tax credits, private scholarships, andhomeschooling. For instance, in 1991Minnesota became the first state to open acharter school.11 Today 36 states, PuertoRico, and the District of Columbia have lawsallowing charter schools.1 2 Milwaukee,Cleveland, and Florida have adopted voucherprograms; Minnesota, Arizona, Iowa, andIllinois have adopted tuition tax credits. Atthe same time, a growing number of organi-zations are privately funding scholarshipprograms. For example, the Children’sScholarship Fund had awarded approxi-mately $160 million in scholarships as ofOctober 1, 1999, helping to send 40,000 chil-dren to private schools.1 3 The Home SchoolLegal Defense Fund estimates that the num-ber of children being educated at home hasbeen increasing at a rate of 15 percent peryear since 1990; as of the 1997–98 schoolyear, there were approximately 1.5 millionhomeschoolers.1 4

Despite the growing demand for alterna-tives to state-run education, government stillcontrols most of the money spent on educa-tion in the United States. Of the $740 billionthe United States spends on education,approximately 75 percent is collected, con-trolled, and spent by government.15 Government-run elementary and high schools, which teachapproximately 88 percent of U.S. students,enjoy near-monopoly status.1 6

Although researchers offer many explana-tions1 7 for the failure of public schools, thelack of competition appears to be a funda-mental cause of the system’s stagnation.Lewis Perelman, author of School’s Out, puts itthis way: “In essence, the public school isAmerica’s collective farm. Innovation andproductivity are lacking in American educa-tion for largely the same reasons they werescarce in Soviet agriculture: absence of com-petitive, market forces.”18

Edupreneurs are attempting to addressthe need for improving K–12 education bothby working within and by competing againstthe state-run schools with a variety of prod-ucts and services. Some companies are

The average gradethat parents andthe public gener-

ally give theschools in theircommunity andin the nation at

large has declinedsince 1974 and

hovers between C and C+.

4

restructuring or creating schools, and othersoffer technologies that can improve schools,retrain teachers, or facilitate education athome. The following is an overview of for-profit schools and the educational productsand services they offer in the K–12 market.

For-Profit SchoolsThe growth of charter schools and the

adoption of voucher programs and tuition taxcredits are providing companies with moreopportunities to become involved in adminis-tering and opening schools. Although for-profit schools currently serve a relatively smallnumber of students (approximately 100,00019

students at 230 schools),2 0 for-profit compa-nies are awarded roughly 10 percent of allcharters.21 Therefore, as states increase thenumber of available charters and adopt morevoucher and tuition tax credit programs, thenumber of schools administered and openedby education companies will likely increase.

Parents’ motives for seeking alternativeschools vary and are not simply a function ofwanting better academic offerings. William G.Howell and Paul E. Peterson of the HarvardProgram on Education Policy and Govern-ance studied the decisionmaking criteria usedby parents with children participating in avoucher program in Dayton, Ohio, and foundthat, in addition to academic quality, parentsconsidered teacher quality, discipline, schoolsafety, and religious instruction important.22

Other studies conducted on choice programsin San Antonio, Texas, and New York Citysupport those findings.2 3

Parents also have ideas about what theirchildren should learn and how they should betaught—ideas that often conflict with thoseof government school systems. This problemis manifest in ongoing debates: Shouldschools adopt character education, and, if so,what values should be taught? Shouldschools adopt phonics or whole languageinstruction? What are the roles of self-esteemeducation, multiculturalism, and religion inschools? While government schools attemptto find one-size-fits-all solutions to thosepolarizing questions, for-profit schools have

entered the marketplace to give parentsoptions.

There are dozens of for-profit companiesinvolved in school administration and owner-ship. They vary in the services they offer, edu-cation philosophy, curriculum, and methodof instruction. However, for-profit schoolsshare several characteristics that distinguishthem from most government schools:

• A mission statement: For-profitschools clearly define their goals andphilosophies, helping school employ-ees and parents understand the pur-pose of the school.

• Assessment and accountability: For-profit schools and school managementcompanies typically measure results interms of student performance and par-ent satisfaction. They recognize thatthey will be held accountable if they failto deliver on their promises, either byparents removing their children fromthe school or by school boards failingto renew their charters or contracts.

• Curriculum and teaching method: For-profit schools tend to adopt particularresearch-based curriculums and instruc-tional methods. Schools highlight theirphilosophy, curriculum, and instruc-tional methods so parents can deter-mine whether a school’s offerings aresuitable for their child.

Perhaps the best-known for-profit school-ing company is Edison Schools. Edison is thelargest private operator of public schools,running 79 schools for roughly 38,000 stu-dents in the United States as of November1999.2 4 Twenty-four of those schools arecharter schools; the other 55 schools are“contract schools,” or schools that Edisonoperates under an agreement with the localschool board.2 5

Edison Schools emphasizes the impor-tance of technology in education. After thefirst year of a school’s operation, Edison givesevery student in second grade or above a com-puter and modem for home use and offers a

5

Edupreneurs areattempting toaddress the needfor improvingK–12 educationboth by workingwithin and bycompetingagainst the state-run schools witha variety of prod-ucts and services.

program that shows parents, teachers, andstudents how to use computers effectively.Edison schools also have longer and moreschool days; Edison students spend 28 percentmore time in school each year than do stu-dents in regular public schools.26 Edison usesa reading program developed at JohnsHopkins University and a mathematics pro-gram from the University of Chicago.2 7EdisonSchools may appeal to parents who view com-puter literacy as a priority for their children.(See Appendix, Table A.1.)

National Heritage Academies, a differentsort of for-profit schooling company, man-ages 22 charter schools in Michigan andNorth Carolina and focuses on educatingstudents to be “good citizens,” as well asgood students.2 8 National Heritage Acade-mies puts it this way: “The importance ofheroes and a moral focus are incorporatedinto the curriculum, with strong emphasisplaced on the uniqueness of U.S. history andon the people who shaped it.”29 NationalHeritage Academies encourages parentalinvolvement in education by asking parentsto pledge to be involved in their children’seducation and by providing “parent rooms”so parents feel welcome.

National Heritage Academies follows theHirsch Core Knowledge Sequence, whichemphasizes mastering fundamental skillsand a “standard body of knowledge.”3 0

National Heritage Academies measuresresults by student performance and parentsatisfaction. For instance, it advertises: “Testresults over the past two years show that stu-dents have scored 35 percent above thenational average on standardized tests mea-suring grade level growth.”31 In addition,National Heritage Academies highlights par-ent surveys that show that parents are over-whelmingly satisfied with the schools.32 (SeeAppendix, Table A.2.)

A third variation in for-profit schooling isthe SABIS School Network. The networkconsists of 22 member schools and threeassociate member schools around the worldserving roughly 18,500 students.3 3 SABISschools are located in Jordan, Egypt,

Lebanon, the United Kingdom, and othercountries as well as in Massachusetts,Michigan, and Minnesota. In the UnitedStates, SABIS operates both charter and pri-vate schools. Each school is financially andadministratively independent, but all schoolsuse the SABIS educational system, called theSABIS Edge: “SABIS Edge prepares all stu-dents for success in college, fosters a love forlife-long learning and develops responsibleworld citizenship. It blends quality educationwith traditional values of hard work and dutyto self and others.”34

SABIS uses information brochures onindividual schools to reach out to parents ofprospective students. For example, thebrochure describing the International Schoolof Minnesota, a private pre-K–12 school,emphasizes the school’s global perspectiveand the diversity of its student body: “At ISM,one third of the students have multiculturalbackgrounds. . . . This focus on culturaldiversity adds a unique flavor to ISM.Students quickly learn to be sensitive to theexperiences of others and learn to appreciatedifferences as well as similarities.”3 5Parents ofprospective students learn that the studentwill begin studying another language inpreschool, will be required to wear a uniform,and will be able to participate in numerousextracurricular activities. SABIS may appealto parents who are new to the country orbelieve that a global perspective will beimportant for their child’s future.

Two other education companies, BrightHorizons Family Solutions and NobelLearning, demonstrate how responsive com-panies can be to customer demands for newor better services. Both companies startedout as for-profit child care providers and, inboth cases, parents’ enthusiasm for the day-care programs led the companies to expandtheir services and open for-profit schools forschool-aged children.

Bright Horizons Family Solutions is thenation’s largest provider of employer-spon-sored child care, with family centers serving31,000 children36 for more than 200 compa-nies, including Boeing, DuPont, Johnson &

6

Bright HorizonsFamily Solutions

and NobelLearning demon-

strate howresponsive com-panies can be to

customerdemands for newor better services.

Johnson, Mattel, and Motorola, and theUnited Nations.3 7 Like for-profit K–12 edu-cation companies, Bright Horizons high-lights its accreditation by the NationalAssociation for the Education of YoungChildren and use of the “The World at TheirFingertips Program for Learning,” which isbased on the work of developmental theo-rists and educators, including Jean Piagetand Erik Erickson.38

Parents who were accustomed to and sat-isfied with Bright Horizons’ early-learningfacilities wanted their children to continuelearning in a Bright Horizons school. Inresponse, Bright Horizons opened a privateelementary school in Bellevue, Washington,to meet parents’ demands:

We opened Chestnut Hill Academyin response to demand from parentswho wanted to keep their school-agechildren in a Bright Horizons FamilySolutions program. Chestnut Hillhas an innovative design that servesworking-parent families with pro-gressive, community-oriented learn-ing and an extensive after-schoolenrichment program including karate,piano, cooking, art, and science.3 9

Like Bright Horizons, Nobel LearningCommunities, Inc., began as a child careprovider and expanded its business toinclude K–12 education. Nobel LearningCommunities operates 153 schools, includ-ing approximately 100 preschools, in 16states.4 0 Nobel’s services include privatepreschools, elementary and middle schools,schools for learning-challenged students,publicly funded charter schools, corporate-sponsored schools, diagnostic and tutorialcenters, and summer camps. Parents canlearn about Nobel’s various programsthrough Nobel’s informational brochuresand on its Web sites. For example, onebrochure includes Nobel’s mission statement,vision, and general educational curriculum.41

Parents whose child will be entering first gradewill find that they can expect their child to be

learning addition and subtraction through 18and place values up to 100 and to be intro-duced to geometry, fractions, telling time,and problem solving in the mathematicsprogram.42

Nobel also offers brochures on some indi-vidual schools and programs. For example, aparent of a child suffering from dyslexia,attention deficit disorder, or other learningdisabilities can review information about thePaladin Academies. There are eight stand-alone Paladin Academies, and the Paladinprogram is available at many of the privateschools. Parents can review the type ofinstruction that will be available to theirchild and the tutoring, summer camps, andother programs available for special-needsstudents.4 3

Nobel emphasizes its students’ perfor-mance on the Stanford 9, a national achieve-ment test that is administered to all K–8Nobel students.4 4 However, Nobel also rec-ognizes that there are different goals for dif-ferent students. For example, Nobel’sbrochure on the Houston Learning Acade-my, a high school that caters to studentswho need extra attention and may have hadtrouble in traditional schools, emphasizesthe high graduation rate and the percentageof graduates who go on to college.4 5 Nobelrecognizes that high test scores are only onemeasure of success. As parents know, differ-ent children have different needs.

The growing demand for alternativeK–12 schools presents opportunities foreducation companies, but there are alsomany obstacles. Companies attempting tostart schools face large overhead: schoolbuildings, staff, computer technology, text-books, and other materials require a consid-erable initial investment. They often mustcontend with teachers’ unions that typicallyoppose change in the educational systemand are hostile to for-profit schools, whichmay make attracting qualified teachers moredifficult.4 6 Companies managing charterschools also face significant political risk:they depend on government funding, andshifting political winds may blow against

7

Nobel’s servicesinclude privatepreschools, ele-mentary and mid-dle schools,schools for learn-ing-challengedstudents, charterschools, corpo-rate-sponsoredschools, diagnos-tic and tutorialcenters, and sum-mer camps.

them. Charter schools are generally freefrom some of the regulations that publicschools typically face; however, they still arelimited as to the methods of student selec-tion, and they must consider the possibilitythat such regulations could increase.4 7 Forthose reasons, many for-profit schools haveyet to turn a profit. Edison Schools, forinstance, lost $49.4 million in the fiscal yearthat ended on June 30, 1999, and expects toincur losses in the future.4 8

Another for-profit school managementcompany, TesseracT Group, Inc., which oper-ates approximately 38 charter schools,preschools, and private schools, is also strug-gling financially.49 TesseracT schools aim toprovide students with a personalized educa-tional experience, low teacher-to-studentratios, and a rigorous academic curriculum.50

However, TesseracT has suffered financiallosses of $14 million in two years, resulting inthe company’s being removed from theNASDAQ.5 1 As of March 2000, TesseracT wascontemplating a 10 percent tuition increase.5 2

Although it is beyond the scope of thispaper to fully dissect the root of any compa-ny’s financial difficulties, some discussion isin order. Critics of for-profit education mayview TesseracT’s problems as evidence thateducation is unprofitable and best left inthe hands of government, but this company’sexperience provides a number of alternativeconclusions. It is possible that TesseracToffers a quality product but is having diffi-culty competing against schools thatreceive government funds for their facilitiesand pay no taxes; the playing field isuneven.

It is also possible that TesseracT’sschools are not living up to their promises.If that is the case, it is evidence of theimportant role the market plays in ensur-ing quality. If parents are dissatisfied with aschool’s product, then they may removetheir child and the company loses the fund-ing associated with that child. Therefore,schools that do not provide adequate ser-vice will fail. Likewise, charter schools thatfail may have their charters revoked by the

government. In fact, there have been severalinstances in which charters have beenrepealed when schools have failed to live upto their promises.5 3

Certainly, school boards’ shutting downfailing charter schools is a marked improve-ment. For too long, government hasresponded to failing schools by proppingthem up with more money. However, policy-makers and the public should consider whoshould be in the position of determiningwhether or not a school is a “failure.” Schoolboards may have conflicting loyalties: Ahypothetical example is a charter school thathires predominantly nonunion employees.The school board is likely to feel pressure toeliminate such a school. In contrast, whenparents are in control, the successful educa-tion and safety of the students are likely tobe the foremost consideration. A free andcompetitive market is the most effective andefficient way to make schools accountableand to determine the success or failure of aschool.

The experience of for-profit school man-agement companies suggests that a fullycompetitive education marketplace woulddiffer from the current system in severalimportant ways:

• Edupreneurs would likely open schoolswith a wide variety of curriculums,instructional methods, and educationphilosophies in an effort to serve andsatisfy a diverse customer base. Thisstands in marked contrast to the gov-ernment system in which schools havelittle ability or incentive to specialize,diversify, or cater to the differentdemands of parents.

• For-profit schools would give parentsmore opportunities than does the cur-rent government system to chooseschools with academic standards andvalues that reflect their priorities.

• A customer-driven educational sys-tem would weed out substandardschools more rapidly than does thecurrent system.

8

A customer-dri-ven educational

system wouldweed out substan-

dard schoolsmore rapidly than

does the currentsystem.

Technologies, Products, and ServicesIn 1992 Lewis Perelman, author of School’s

Out and former director of Project Learning2001 for the Hudson Institute, hypothesizedabout how technology could transform theU.S. educational system:

A technology revolution is sweepingthrough the U.S. and worldeconomies that is totally transformingthe social role of learning and teach-ing. This learning revolution alreadyhas made “the classroom teacher” asobsolete as the blacksmith shop. In itsaftermath, most of what now passesfor education “reform” will appear asuseful to economic security in the1990s as the Maginot Line was to mil-itary security in the 1940s.54

Perelman’s hypothesis seems correct: newtechnologies, if applied correctly, could signifi-cantly enhance, facilitate, and even revolutionizeeducation. However, developing technologiesand programs that will facilitate or change thelearning process requires a significant investmentin research and development. The Panel onTechnology under the President’s Committee ofAdvisors on Science and Technology noted thatthe lack of investment in research is a seriousproblem facing the U.S. educational system:

Funding levels for educationalresearch, however, have thus far beenalarmingly low. By way of illustra-tion, whereas some 23 percent of allU.S. expenditures for prescriptionand non-prescription medicationswere applied toward pharmaceuticalresearch in 1995, less than 0.1 per-cent of our nation’s expenditures forelementary and secondary educationin the same year were invested todetermine which educational tech-niques actually work, and to findways to improve them.5 5

While the government system invests nextto nothing in research and development for

education, for-profit companies are design-ing and applying new technologies to facili-tate learning, measure student progress, offerexpanded learning opportunities over theInternet, and train and assist teachers. Thefollowing overview provides a sampling ofthe types of technological research, products,and services that for-profit companies havedeveloped to improve education.

Perhaps more than any other for-profiteducation company, Scientific Learningallows us to glimpse the potential for edupre-neurs to bring about revolutionary change ineducation. Scientific Learning has developededucational software based on 25 years ofbrain research. The software, dubbed “glassesfor the ears” and marketed under the nameFast ForWord, has been shown to dramati-cally improve the language and reading skillsof children aged 4 through 13, particularlychildren who have difficulties reading andprocessing speech. Scientific Learningreports, “On average, children with languageand reading problems make language gainsof 1.5 to 2 years after 4 to 8 weeks of FastForWord training.”5 6 Scientific Learningdescribes the process they have developed as“computer-controlled, repetitive trainingexercises that automatically adapt to eachuser’s performance to modify the manner inwhich the brain processes language.”5 7

The benefits of Scientific Learning’s pro-grams were confirmed in a recent study inthe Philadelphia public school system.Twenty-three students who risked academicfailure received between 4 and 10 weeks oftraining. Before the training, the studentstested well below average; after usingScientific Learning’s programs, 70 percent ofthe students had moved into the averagerange. Moreover, the average student gainedthree and a half years of language skills.58

(See Appendix, Table A.3.)The potential for products that isolate

brain processes has captured the interest ofthe media and researchers. Articles on theramifications of Scientific Learning’s find-ings and products have appeared in Time andNewsweek. Newsweek’s article focused on the

9

While the govern-ment systeminvests next tonothing inresearch anddevelopment foreducation, for-profit companiesare designing andapplying newtechnologies tofacilitate learn-ing.

importance of the findings:

Improved learning based on neuro-science may be the first dream to berealized. Educators, for the mostpart, ignore (or are ignorant of) themechanisms by which the brainchanges so that it is capable of, say,deductive logic. But make no mis-take: the brain capable of logic isphysically different from the brainthat is not. . . . With Fast ForWord,made by Scientific Learning Corp.,they set about changing the brain sothat it recognizes such lightning-fastphonemes.59

Scientific Learning is an example of howthe profit motive spurs innovative researchand development to the benefit of students.By funding research on how information istransmitted and processed by the humanbrain, companies like Scientific Learningcould radically alter the way educatorsattempt to transmit knowledge to childrenand adults alike.

Another company, Advantage LearningSystems, Inc., provides learning informationsystems for K–12 schools in the United Statesand Canada. A learning information systemis computer software that drills students ontheir lessons and provides teachers withassessments of students’ progress. AdvantageLearning Systems’ Accelerated Reader pro-gram consists of computer-based multiple-choice tests on literature. Quizzes are avail-able on approximately 20,500 books appro-priate to students in grades K–12, and teach-ers can select books that they feel will be mostuseful and create their own lesson plansusing the computer program.6 0 AdvantageLearning Systems offers similar programs inmath and grammar. Those programs drillstudents with sets of problems and offerinstant feedback, highlighting and correct-ing the students’ mistakes.

Educators receive reports on students’performance; some programs include a data-base that lets teachers compare a student’s

performance against national norms. Thosereports reduce teachers’ administrativeduties and provide feedback that helps teach-ers, administrators, and parents understandwhich methods are successful and to deter-mine where resources should be allocated.Independent studies conducted on the com-pany’s behalf indicate that use of theAccelerated Reader improves standardizedtest performance in reading.61 (See Appendix,Table A.4.)

A third example of innovation comesfrom TRO Learning Inc., which has designedcomputer-based educational and trainingprograms to provide adolescents and adultswith problem-solving skills that are transfer-able to the workplace. For example, TROLearning’s Math Problem Solving programincorporates mathematical concepts into“real-life situations like building a road orgrowing lilies in a greenhouse.”6 2 TROLearning’s product line includes programsfor reading, writing, language, math, science,social studies, technology, and job skills. Theprograms, which can be accessed on CD-ROM or over the Internet, include an initialassessment of skill level and provide feedbackthat tracks the student’s progress.

New technologies also make it possiblefor students to take courses that are notoffered in their own schools. Apex Learninglets students access online courses and prac-tice tests for Advanced Placement exams,which allow students with satisfactory scoresto receive credit at many colleges.6 3 Theonline classes are available in 10 subject areasincluding calculus, economics, and govern-ment, and each consists of about 25 studentsand an AP teacher. Students have flexibilityabout when and how they study and can par-ticipate in online classroom discussions.They e-mail comments and assignments totheir teachers and receive feedback andgrades online.

Apex enrolled 150 students in a pilot testof two products in January 1999. Of thosestudents, 50 completed the course and 32took the AP exam.6 4More than 80 percent ofthose who took the exam passed it, and close

10

ScientificLearning has

developed educa-tional software

based on 25 yearsof brain research.The software has

been shown todramatically

improve the lan-guage and read-

ing skills of chil-dren aged 4through 13.

to 60 percent achieved high scores of 4 or 5.65

Although this group is small and the resultsare not statistically significant, they do sug-gest that the course did successfully preparestudents for the exam. During the1999–2000 school year, 600 students wereenrolled in Apex courses; those studentscame from 137 schools and 10 home school-ing families in 28 states.66

For-profit companies are also creating pro-grams to train teachers to use technologyeffectively. Apex Learning, for instance, hasteacher-training programs to prepare teachersto assist students preparing for AP tests.Advantage Learning Systems conducts work-shops on Reading Renaissance and MathRenaissance to teach educators how to use thecompany’s programs. As of December 1998,an estimated 110,000 educators had attendedReading Renaissance training programs.67

Scientific Learning also holds seminars toteach educators and speech and language pro-fessionals about developments in brainresearch and practical uses for the company’sproducts.

Products offered by those for-profit com-panies highlight the potential for the devel-opment and application of technologies thatcould facilitate learning and dramaticallyimprove the nation’s skill base.

Postsecondary and AdultEducation

The postsecondary education sector hasbecome increasingly important as the needfor skilled workers has grown. Already, theUnited States faces labor shortages in criticalsectors of the economy. There are simply notenough qualified workers to fill the jobsavailable in high-tech industries.6 8Accordingto a 1998 Coopers & Lybrand “TrendsetterBarometer” survey of Fortune 500 CEOs,approximately 70 percent said they face seri-ous problems finding skilled workers.6 9

The growing demand for skilled workershas changed the composition of the postsec-ondary education marketplace as more adults

seek additional education and training.However, providers of traditional postsec-ondary education have been slow to adapt tothe needs of consumers of adult education:

While adults over 25 represent nearly50 percent of our postsecondary stu-dent population, most colleges anduniversities are still operating in theold education paradigm, set up toserve students age 18–22 who arelooking for a general education aswell as a “college experience”—foot-ball games, student unions, and fra-ternities or sororities. The lack ofconvenient education options trans-lates to opportunity for innovativeproprietary postsecondary institutionsthat can provide a “no nonsense” and“customer” oriented, efficient educa-tion model that is convenient, accessi-ble, and relevant in today’s world.7 0

There are several possible explanations forwhy existing public and nonprofit universi-ties may be failing to respond sufficiently tothe growing demand for adult education. Forexample, public universities’ primary sourceof income is state governments, not tuition.71

Since universities do not depend on tuition,administrators may be slower to respond to agrowing potential client base. EconomistGary Wolfram of Hillsdale College writes:“Public institutions of higher education donot generally market themselves, and tuitionpolicy depends on state appropriationsrather than profit maximization. Much hasbeen written about the fact that professorsare not rewarded on the basis of their teach-ing services.”7 2Many private universities alsodo not depend solely on student tuition forfinancing. For example, at the KennedySchool of Government at Harvard University,the dean often reminds students that tuitionpayments do not cover the cost of their edu-cation. The school draws on an endowment,built by alumni and other donors. It is likelythat administrators of private universitiessuch as Harvard respond to the demands of

11

The postsec-ondary educationsector hasbecome increas-ingly importantas the need forskilled workershas grown.

alumni as much or more than they respondto the demands of current students. Thatmay make change less likely.

To meet the demands of the 6.1 millionadult students, for-profit companies are creat-ing programs and services that cater to thosestudents’ lifestyles.7 3 Although the for-profitsegment of the postsecondary education mar-ket accounts for just $5 billion, or less than 2percent of the total industry,7 4 it is rapidlyexpanding and becoming increasingly impor-tant to the knowledge economy. In particular,the shortage of technology workers has ledmany adult students to seek additional tech-nical training. The following is an overview offor-profit postsecondary education providersand distance-education services.

Postsecondary Education ProvidersThere are numerous for-profit companies

providing postsecondary educational pro-grams for adults. The subjects, degrees, andprograms offered vary; however, for-profitpostsecondary education providers generallydiffer from traditional colleges and universi-ties in three important ways:

• Flexible, worker-friendly schedules:For-profit postsecondary institutionstry to make it possible for a student towork and pursue education by schedul-ing classes in the evenings and duringthe summer.

• Job-related skills: Most programsoffered by for-profit postsecondaryinstitutions are specifically designed tohelp students acquire skills that willdirectly improve the students’ careerprospects. There is much less focus onliberal arts, humanities, or even basicsciences than in traditional colleges.

• Success is measured through the jobmarket: For-profit schools attract stu-dents by emphasizing the job-place-ment rates of former students.

For instance, DeVry, Inc., first began offer-ing technology training courses in radio, televi-sion, and sound systems in 1931.7 5 Today

DeVry offers undergraduate, graduate, and“lifelong” learning programs to 38,000 full- andpart-time students on 16 campuses.7 6 DeVry’sstudents can obtain bachelor’s degrees in elec-tronics engineering technology, computerinformation systems, telecommunicationsmanagement, accounting, technical manage-ment, and business administration.

DeVry differs from typical providers ofpostsecondary education in its emphasis onproviding career-oriented training. DeVrycontrasts its faculty with professional experi-ence, lab sessions with modern technologies,and classes focusing on “hands-on applica-tion” with traditional programs in whichprofessors, often without related profession-al experience, focus on theory.7 7

Unlike traditional postsecondary institu-tions, which often measure their results bythe caliber of students they attract, DeVrymeasures its results by job-placement rates.DeVry offers an employment assistance pro-gram for its graduates and boasts that morethan 90 percent of its graduates who pursueemployment have a job within 180 days ofgraduation.78 DeVry also structures itsschedule to take into account the prioritiesof adult students. Courses are available atnight and during the summer, making itpossible for a full-time student seeking abachelor’s degree to obtain one in threeyears; a part-time student can obtain one infive years. (See Appendix, Table A.5.)

DeVry is only one of a growing number ofcompanies offering adult postsecondary edu-cational programs. On 11 campuses in theDistrict of Columbia, Virginia, and Maryland,Strayer Education, Inc., serves 10,000 stu-dents who seek degrees in business and infor-mation technology.7 9 ITT EducationalServices, Inc., operates 67 technical institutesin 27 states serving roughly 25,000 studentsseeking skills in technology-related fields.8 0

Education Management Corporationoffers associate’s and bachelor’s degree pro-grams and nondegree programs in design,media arts, culinary arts, and fashion. At 18schools in 16 cities, in 1998 EducationManagement served more than 21,000 stu-

12

DeVry measuresits results by job-placement rates.

More than 90 per-cent of its gradu-ates who pursue

employment have a job

within 180 days of graduation.

dents with courses designed to help studentsdevelop the skills necessary to gain entry tovarious fields including graphic design, mul-timedia and Web design, computer anima-tion, video production, culinary arts, interiordesign, industrial design, photography, andfashion marketing.8 1 Like DeVry, EducationManagement measures success in terms ofstudent employment: approximately 91 per-cent of 1998 graduates seeking employmentreceived positions in their desired fields with-in six months of graduation.82

Those and other for-profit postsecondaryinstitutions are changing the composition ofthe postsecondary marketplace by servingthe needs of adults seeking new skills.

Distance LearningNew technologies are also making it easi-

er for adults to continue their educationthrough “distance” or “distributed” learning.Distance learning consists of educationalprograms that are distributed via communi-cation technologies such as the Internet,satellite technology, and video. Those pro-grams allow students to complete course-work without ever entering a traditionalclassroom or campus, which makes coursesboth more affordable and accessible formany workers. The U.S. Department ofEducation estimated that one-third of highereducation institutions offered distance edu-cation courses in 1995 and another 25 per-cent planned to offer such courses withinthree years.83 Forbes estimates that approxi-mately 90,000 courses at U.S. colleges anduniversities are offered through some formof distance learning.8 4 The InternationalData Corporation estimates that the numberof students enrolled in distributed learningwill increase from 710,000 in 1998 to 2.23million in 2002.8 5

The University of Phoenix Online, a for-profit university run by the Apollo Group,was one of the first online degree programsoffered by an accredited university. The pro-gram was first offered in 1989, and by 1999there were approximately 10,000 studentsenrolled.86 Today the University of Phoenix

Online boasts roughly 13,500 students pur-suing degrees online.8 7

Through the online program, studentscan obtain numerous degrees in a range ofsubjects including education, businessadministration, accounting, computer infor-mation systems, and nursing. Studentsenrolled in the online program receiveassignments and instruction over theInternet. Typically, at the beginning of theweek instructors send out information(which may include a lecture) on the topic ofthe week, the assignment (e.g., reading that isaccessible through the university’s electroniclibrary or from a course textbook or a writtenassignment), and discussion questions.Students can participate in electronic class-room discussions, ask questions, and receivefeedback online. Students turn in assign-ments to their instructors and receive gradesand comments online.8 8

Tuition for the University of PhoenixOnline is less than tuition at the average uni-versity: the cost of obtaining a bachelor’sdegree typically runs from $12,000 to$24,000.8 9In contrast, the National Center forEducation Statistics estimates that the averagecost of obtaining a bachelor’s degree runsfrom $13,000 at public colleges to $56,000 atprivate colleges.9 0 However, the low cost ofpublic universities is misleading since it doesnot include the substantial subsidy providedby taxpayers. For example, Gary Wolfram,author of “The Threat to IndependentEducation: Public Subsidies and PrivateColleges,” estimates that in-state tuition cov-ers only 28 percent of the costs of providing aneducation in a public college.9 1Therefore, thecost of a public university education is likely tobe more than three times the tuition charged,or roughly $9,000 annually or $39,000 for adegree. In reality, the University of PhoenixOnline has substantially lowered the cost ofobtaining a bachelor’s degree.

Kaplan Inc., a wholly owned subsidiary ofthe Washington Post Company, createdConcord University School of Law, the onlyonline law school, in the fall of 1998.92

Concord’s curriculum corresponds to the

13

Tuition for theUniversity ofPhoenix Online isless than tuitionat the average university.

curriculum of American Bar Association–accredited law schools and draws from case-books and textbooks found on typical “fixedfacility” law school campuses. Concorddescribes a typical day as consisting of “read-ing and briefing cases offline; attending a pro-fessor-led chat room; discussing course workwith classmates in an online study group; or,doing research using one of the electronic net-works available to Concord students.”9 3

Currently, more than 500 students areenrolled in Concord’s juris doctor and execu-tive J.D. programs, and Concord expectednearly 750 students in the fall of 2000.9 4

Concord University demonstrates oneway in which regulations get in the way ofnew forms of higher education. Concord isauthorized to award degrees by the Bureau ofPrivate Post-Secondary and VocationalEducation in California and is accredited bythe Distance Education Training Council.Concord has also complied with the registra-tion requirements of the California state bar.Therefore, Concord graduates can apply foradmission to the California bar and, uponpassing the test, are qualified to practice inCalifornia courts.9 5However, Concord is notaccredited by the ABA because the ABA andstate bar associations do not evaluate oraccredit online legal programs:

The standard for most fixed facilityschools is accreditation by theAmerican Bar Association (ABA).ABA accreditation allows graduatesof the accredited schools to sit forthe bar examination in any state.However, distance education pro-grams do not meet the “residencestudy” requirement of the ABA, andtherefore they are ineligible to applyfor accreditation.96

As a result of state regulations that requirethat, to take the bar exam, one must havegraduated from a law school accredited bythe ABA, Concord University graduates cantake the bar exam only in California. Thatmakes it more difficult for Concord to attract

students from elsewhere in the country.Since ABA accreditation is not available

for Concord, Concord instead highlightsthat it is a division of Kaplan EducationalCenters and is committed to maintainingKaplan’s reputation for educational excel-lence. Concord also emphasizes its facultyand advisers, including legal scholars such asArthur Miller, Bruce Bromley Professor ofLaw at Harvard Law School.97

The success of online institutions inattracting students highlights the consider-able changes that technology makes possible,including challenging traditional notions of“college.” Since online universities are moreaffordable and do not require students tospend their days on a campus, they have thepotential to eliminate some of the barriersthat prevent people from obtaining degrees.For example, the average age of a student atConcord is 40 years,9 8 which suggests thatonline colleges are attracting a differentclientele than does a typical university.Furthermore, the accessibility and afford-ability of online instruction may be particu-larly important to low-income individualsand people with physical limitations whotraditionally have had less access to highereducation.

Policy Implications

The innovative, competitive, for-profiteducation market stands in stark contrast tothe stagnant public school system that holdsalmost 90 percent of the nation’s childrencaptive each day. Moving toward a market-based system holds great promise forimproving the quality of education in thecountry. There are numerous studies thatdemonstrate the benefits to be had from sim-ply allowing parents choice among publicschools. Even that limited bit of empower-ment has been shown to improve parents’satisfaction with the schools and raise mostchildren’s test scores.9 9

However, as Perelman concludes inSchool’s Out, just providing “choice” among a

14

The innovative,competitive, for-profit educationmarket stands instark contrast to

the stagnant pub-lic school system

that holds almost90 percent of the

nation’s childrencaptive each day.

number of government-run schools and per-haps a few schools run by alternativeproviders is not sufficient to spur a competi-tive marketplace:

“Choice” as a synonym for free mar-kets—where consumers are free tochoose and vendors are free to createand sell a variety of products and ser-vices—is undeniably essential to cureeducation’s morbid productivity andfestering irrelevance. . . . However, theneed not merely for “choice” but forcommercialization of education hasbeen overlooked by most would-bereformers. We need commercialchoice and competition in educationfirst to goad technical innovation—the profit motive is essential toreward the creation and provision ofproductive technologies. . . . Profit-motivated competition also is neces-sary to provide quality control. Onlymarkets can create the informationneeded to determine “what works”economically.100

Perelman imagines a world without “cre-dentialism,” where businesses cannot considerthe educational “pedigree” of a job applicantbut instead must focus on what an individualknows and can do. That mental exercise servesas a reminder of the fundamental purpose ofschools:

With diplomas no longer having eco-nomic value, the public would quick-ly turn its attention to what it shouldhave been paying attention to allalong: What do you need to learn toget the economic opportunities youwant? And, what’s the fastest, cheap-est, best way to learn that?101

The for-profit education industry isalready offering a wide range of affordablehigh-quality education services to help cus-tomers become knowledgeable individualsprepared to meet the challenges of the con-

stantly changing economy. Policymakers should pursue reforms that

enable education companies to flourish andindividuals to pursue further education. Inparticular, policymakers should consider thefollowing reforms:

• Return education dollars to individualsthrough tax cuts and universal tuitiontax credits. Such policies would begin toloosen the government’s monopoly oneducation and allow the natural growthof a vibrant education marketplace.

• Level the playing field by ending subsidiesto government-run universities. Thosesubsidies make it difficult for privatepostsecondary institutions to compete.

• Reduce the overall tax burden. Byreturning money to taxpayers, policy-makers would enable more individualsto invest in their own education andmore companies to invest in trainingtheir employees. Such policies wouldencourage research and development asmore investment capital would be avail-able to for-profit education companiesand there would be a greater market fortheir products.

Such policies would increase educationalfreedom, by giving parents choice, encouragingcompetition, and motivating edupreneurs toinvest in researching and developing more effec-tive, efficient ways of educating individuals.

Answering the Critics

Student Achievement

The bottom line for public educa-tion has to be student achievement,not profit for private entities. . . .102

Opponents of customer-driven educationcontend that education should be aboutlearning, not profit. Since companies natu-rally are in business to make money, they willbe more interested in cutting costs than in

15

Moving toward amarket-basedsystem holdsgreat promise forimproving thequality of educa-tion in thiscountry.

achieving results. That line of reasoning isfundamentally flawed: Learning and profitare not mutually exclusive. In fact, in the caseof education, they are inextricably linked.The most successful education businesses areand will continue to be those that enable stu-dents to learn the most at the lowest cost.

In virtually every sphere of life, individualsrely on competition between businesses tomeet consumer demands for products andservices. The competitive process ensuresthat businesses will work to meet consumerdemands; firms that fail to satisfy customersgo out of business. That “creative destruc-tion” tends to weed out poorly conceived andpoorly run businesses and cultivates innova-tive industry leaders. We trust that competi-tive process to supply us with the foods weeat, the clothes we wear, and the homes welive in. It is counterintuitive to abandonthose principles when it comes to somethingas important as education.

Edupreneurs will have to strike a balancebetween being cost conscious and providinghigh-quality learning experiences. If they cutcosts to the detriment of quality, they willlose customers. We see the forces of marketselection at work today. Companies that aresuccessfully educating their customers, likeKaplan, Inc., are prospering and expandingtheir services. Other companies, likeTesseracT, Inc., are struggling to stay afloat.Although TesseracT’s financial difficultiesmay be due to the difficulty of competingagainst a monopolistic school system andnot to poor customer service, the competitiveprocess that could wipe out TesseracT isessential to a healthy industry. That processcontrasts with the system of governmentschools that never “go under” even when theyfail, year after year, to teach children.

Although there have been some instancesof charters being revoked when schools per-form poorly, it is unlikely that the political sys-tem would be as efficient as the marketplace.For example, in Florida, if a school “fails” fortwo years straight, students in the failingschool receive an “opportunity scholarship”that enables them to attend different schools.

However, all of the schools that earned a gradeof F in 1999 were deemed to be passing thisyear.103 The Florida Department of Educationcited the improvement as good news, but thatimprovement also raises questions about thecriteria used to determine school failure andwhether or not there is the political will to“fail” a school. In the case of the Floridaschools, in order to avoid a grade of F, aschool’s test scores had to be above the mini-mum requirements on just one of three sub-jects. Parents of students in a school thatsqueaks by, failing two of the three subjects,may question whether this system is workingor whether they would have preferred to judgefor themselves whether a particular school“failed” and to have the option of selectinganother school for their child.

In a market, parents would decidewhether or not a school was failing theirchild. As children are placed in schools oftheir parents’ choice and resources are reallo-cated, failing schools will be eliminated—asure step toward improving educational ser-vices for all children.

Parental Decisions

If the greatest handicap suffered bylow-achieving students is their par-ents’ impoverishment, poor educa-tion, lax discipline, and scant interestin education . . . is it really so ridicu-lous to worry that these same par-ents might fail to become tough,savvy, demanding education con-sumers the instant they obtain theright to decide which school getstheir children’s tuition money?104

Critics of customer-driven educationbelieve that if educational choices are left upto parents, they will make poor decisions andjeopardize their children’s futures. However,there is no evidence to support that claimand much evidence to the contrary.

Research on school choice experimentsacross the country shows that parents areperfectly capable of selecting good schools

16

Learning andprofit are not

mutually exclu-sive. They are

inextricablylinked.

for their children. For example, several stud-ies of voucher programs have revealed thatmany students using vouchers or scholar-ships make academic gains as demonstratedthrough increased test scores. In addition,parents say they are more satisfied with thenew schools on a range of measures includ-ing general satisfaction, academic standards,instructional quality, discipline, and safety.105

Some parents are undoubtedly moreinformed and active than others, but in acompetitive market the least-informed con-sumer does not dictate the quality of avail-able options. One need not be an expert inautomobile mechanics to feel confident inpurchasing a car. The existence of someknowledgeable customers forces car manu-facturers to prepare their products forintense scrutiny or risk bad reputations andloss of customers. As a consequence, all con-sumers—even the poorly informed ones—receive higher-quality products than mightexist in the absence of competition. The samedynamic would exist in educational services;the existence of a motivated set of customerswould improve the range of choices availableto “free riders” who had not done theirhomework. In that way, a customer-driveneducational system will raise the quality ofeducation for all children, not only thosewhose parents are deeply involved.

Observers who are skeptical about parentalchoice overestimate the government’s abilityto make smart choices on behalf of children.There are numerous examples of en masseadoption of educational fads by governmentschools. In the 1980s California chose to use a“whole language” philosophy of readinginstead of phonics. California students’ testscores on reading comprehension plummet-ed; faced with that evidence of the experi-ment’s failure, the state superintendent ofschools implied in an interview that the fiascowas just an honest mistake.106 The Californialegislature has since mandated that teachersbe trained in phonics.107

The push in many legislatures to mandatethat all students receive phonics training ismisguided. It is unlikely that there is one best

method of teaching children to read—it seemsreasonable to assume that some students willlearn better with one method and others willdo better with another. Government shouldnot dictate instructional methods.

In an education marketplace, some par-ents might select schools with experimentalteaching methods, but participation wouldbe voluntary. If such schools failed to pro-duce results, parents could easily changeschools. Many parents are already exercisingchoice over teaching methods by turning tofor-profit companies like Gateway LearningCorporation, which produces Hooked onPhonics. Parents should also be able to havecontrol over what method is used in theschool their child attends. Unfortunately,under the current system, parents are subjectto whatever curriculum the government haschosen—if the state or district adopts a par-ticular curriculum or teaching method, mostparents lack the means to send their child toan alternative school.

Accountability

What kind of accountability arethese corporate entities going to beunder?1 0 8

Opponents of for-profit education oftenlament the difficulty of assessing academicquality in an education marketplace. But, as inany competitive industry, potential con-sumers will assess companies on the basis oftheir reputations and brands. The success ofKaplan, Inc., provides an example of theimportant role of a brand name in a market-based education industry. Kaplan is recog-nized worldwide as a provider of quality edu-cation services, particularly standardized testpreparation services. Today the companyoffers myriad educational services includingonline test preparation, high school tutoring,child care, an online law school, employeetraining programs, and professional develop-ment; consulting on K–12 and postsecondaryschool “test readiness”; and guides, software,and more than 100 books on all aspects of

17

Some parents areundoubtedlymore informedand active thanothers, but in acompetitive mar-ket the least-informed con-sumer does notdictate the quali-ty of availableoptions.

education. Kaplan’s reputation as an effective,efficient education company makes its expan-sion and continued success possible. However,to sustain its reputation, Kaplan will have tocontinue to provide quality service.109 (SeeAppendix, Table A.6.)

Potential consumers will consider the rep-utation of for-profit education companies. Ifcustomers’ expectations are not met, they willnot purchase services from that provideragain. Accreditation services will help con-sumers distinguish reputable educationproviders, and employers will judge whetheror not a degree from a for-profit university sig-nals a given set of skills. If employers concludethat employees with distance-learning degreesdo not have the same level of training as dograduates of traditional four-year colleges,they will act accordingly. The marketplace isthe most efficient and effective judge of valueand check on quality.

Markets and Equity

A market by definition can’t addressissues of equity. . . .1 1 0

Low-income students generally suffer themost under the current system and have themost to gain from a competitive educationmarketplace.

First, the argument that the poor will be leftbehind in an education marketplace presup-poses that existing government schools takecare of low-income children, yet studies showthat the current system is failing to educatethose children. Arguably, government schoolshave already left the poor “behind.” TheNational Assessment of Educational Progress,a test of students in grades 4, 8, and 12, whichis regularly administered by the Departmentof Education, has found that lower-incomestudents generally do not perform as well ashigher-income students. For example, in 1998students eligible for the federally funded freeor reduced-price lunch program, which isoffered to children near or below the povertyline, had lower average reading scores in allthree grades on the NAEP than did noneligible

students.1 1 1 Low-income students generallyattend the worst government-run schools andhave the fewest alternatives.

If the money that currently goes to gov-ernment schools on a child’s behalf weregiven directly to the parents, they would beable to use that money to pay for a school oftheir choice. Instead of taking low-incomestudents for granted, schools would have anincentive to deliver quality services in orderto keep their customers.

Such competition would also likely resultin decreased tuition costs. Already, many pri-vate schools are offering education for lessthan the coat of a typical government-runschool. For example, the average per pupilexpenditure in public schools is roughly$7,000, compared to the average per pupilcost of $2,823 for Catholic elementaryschools and $5,466 for Catholic secondaryschools.1 1 2Furthermore, the activities of pri-vate charitable organizations like theChildren’s Scholarship Fund, which alreadydistributes millions of dollars to help low-income families pay private school tuition,suggest that many individuals would be will-ing to donate money to help ensure that chil-dren from low-income families have access toa quality education.

Conclusion

The for-profit education marketplace pro-vides us with a glimpse of what a thriving,competitive market for education might looklike if the United States were to open the edu-cation sector to the forces of competition. Inpursuit of consumers, for-profit educationcompanies have found creative and cost-effi-cient solutions to education problems—forexample, how to cure a speech impediment, todramatically improve children’s ability to read,and to provide educational opportunities forworking adults.

The experience of the for-profit educationindustry suggests that a fully competitiveeducation marketplace would differ from thecurrent system in several important ways:

18

The argumentthat the poor willbe left behind in

an educationmarketplace pre-

supposes thatexisting govern-

ment schools takecare of low-

income children.Arguably, govern-

ment schoolshave already left

the poor“behind.”

• Edupreneurs would likely open schoolswith a wide variety of curriculums,instructional methods, and philoso-phies of education in order to serve andsatisfy a diverse customer base.

• Edupreneurs would invest in researchon and development of new technolo-gies to facilitate the education process.

• Higher education would become moreaccessible and affordable for peoplewith lower incomes and those in theworkforce.

• A customer-driven education systemwould weed out substandard schoolsand products more rapidly than does

the current system.• Edupreneurs would provide education

services designed to prepare students toparticipate effectively in the new economy.

Policymakers interested in improvingAmerica’s educational system should seek toeliminate financial biases against edupre-neurs by adopting policies, such as tax cutsand universal tuition tax credits, that wouldreturn education purchasing power to indi-viduals. Such policies would begin to loosenthe government’s monopoly on educationand allow the natural growth of a vibranteducation marketplace.

19

Policymakersshould seek toeliminate finan-cial biases againstedupreneurs byadopting policiesthat would returneducation pur-chasing power toindividuals.

20

Appendix:For-Profit Education Providers

Table A.1Edison Schools

Company history H. Christopher Whittle, who previously created the first national electronicnews system for middle and high schools in the United States, foundedEdison in 1992. Edison opened its first school in 1995.a

Service description Edison contracts with local school districts and the boards of charterschools to manage education in and the operations of K–12 schools.• Each family with a student in second grade or above receives a computer

and a modem. Edison teaches parents, teachers, and students how to effec-tively use the computers.

• Students spend approximately 28 percent more time in school each yearthan do students attending traditional public schools.

• Elementary schools use a reading program developed at John HopkinsUniversity and a mathematics program developed at the University ofChicago.

Market penetration Edison serves approximately 38,000 students in 79 schools.

Results • Edison schools that have operated long enough to generate trend data(generally two years) show generally favorable gains in test scores com-pared to the best available national measure of achievement trends, theNational Assessment of Educational Progress.b

• Edison’s surveys show that parents with children in Edison schools aremore satisfied with their schools than are parents of children attendingregular public schools.c

Cost Edison schools are supported by government funds on a per pupil basis.Parents do not pay tuition.

aSee http://www.edisonschools.com.bEdison Schools, “Prospectus,” pp. 51–52.c“According to a survey prepared for us by an independent market research firm for the 1997–1998school year, covering all 20 of our schools then in operation, over 50 percent of the parents of our stu-dents gave our schools grades of A or A-. This compares to 37.2 percent of parents who give a grade ofA or A- in U.S. public schools generally, according to the same market research firm.” Ibid., p. 50.

21

Table A.2National Heritage Academies

Company history J. C. Huizenga founded National Heritage Academies in 1996. Huizengawanted to provide his five-year-old son with a better education than thatoffered through a traditional government-run school.a

Service description National Heritage Academies manages charter schools that focus on pro-ducing “good citizens” by emphasizing moral values and increasingparental involvement. • Parents must pledge to be involved with their child’s development, and

schools are equipped with “parent rooms” to make parents feel welcome.• The educational program is based on principles developed by Prof. Ronald

R. Edmonds of Harvard University and Michigan State University. NationalHeritage Academies has a clear mission, sets high expectations for studentachievement, and involves parents in their children’s education.

• National Heritage Academies’ curriculum follows the Hirsch CoreKnowledge Sequence.b

Market penetration National Heritage Academies manages 22 charter schools in Michigan andNorth Carolina, serving approximately 8,000 students.

Results • Over the past two years students have scored 35 percent above the nationalaverage on standardized tests.

• A survey conducted by Wirthlin Worldwide of Grand Rapids, Michigan,on behalf of National Heritage Academies found that parents of its stu-dents are overwhelmingly satisfied with their children’s education.

Cost National Heritage Academies is fully supported by government funds on aper pupil basis. Parents do not pay tuition.

a Stanley Marshall, “Making Money in Schooling: Educators Turned Entrepreneurs,” Journal of the JamesMadison Institute, no. 12 (Spring 2000): p. 25.bThe National Heritage Academies’ Web site describes E. D. Hirsch as a national leader in educationreform, whose work includes numerous books, including Cultural Literacy and What Your lst (2nd, 3rd,etc.) Grader Needs to Know. Hirsch believes the educational system should be based on a standard bodyof knowledge that all children at a particular grade level should learn.

22

Table A.3Scientific Learning Corporation

Company history Scientific Learning was founded in 1996 to combine advances in brainresearch with technology in programs to facilitate learning and communi-cation skills.a

Service description Scientific Learning develops educational software, products, and servicesbased on more than 25 years of brain research and field testing.• One product, Fast ForWord, improves language and reading skills of chil-

dren aged 4 through 13 through “computer-controlled, repetitive trainingexercises that automatically adapt to each user’s performance to modifythe manner in which the brain processes language.” The company is devel-oping similar products for adults.

• The company offers seminars on brain research and markets its productsto educators and speech and language professionals.

Market penetration Scientific Learning is currently focusing on the K–12 market in the UnitedStates but plans to expand to adults. The Web site states, “To date, tens ofthousands of individuals have achieved gains of one to two years in lan-guage or reading skills with Scientific Learning’s training programs.”b

Results Scientific Learning has tested and found significant benefits from their pro-grams. In particular, the Fast ForWord program has been evaluated exten-sively. “On average, children with language and reading problems make lan-guage gains of 1.5 to 2 years after 4 to 8 weeks of Fast ForWord training.”c

Cost These programs are being used at schools and clinics and are also availableto parents. For example, the home version of Reading Edge is available for$99, and prices for educator versions range from $129 to $1,459.

a See http://www.scientificlearning.com/info/index.php3?main=over&cartid= and http://www.scientificlearning.com/info/index.php3?main=history&cartid=.b Ibid. c Scientific Learning Corporation, “National Field Trial Results,” p. 3, http://www.scientificlearning.com.

23

Table A.4Advantage Learning Systems, Inc.

Company history Advantage Learning Systems was founded in 1986.

Service description Advantage Learning Systems provides learning information systems to K–12schools in the United States and Canada.• Advantage Learning Systems’ flagship product, Accelerated Reader, con-

sists of computer-based multiple-choice tests on approximately 20,500books appropriate to students in grades K–12. Similar programs in mathand grammar are also available.

• Some programs include a database that enables teachers to monitor eachstudent’s performance and compare it to national norms.

Market penetration Advantage Learning Systems has sold products to 41,500 schools, orapproximately 33 percent of the K–12 market.a

Results Independent studies conducted on the company’s behalf indicate that use ofthe Accelerated Reader improves standardized test performance in reading.b

Cost Prices vary depending on the services purchased. For instance, theAccelerated Reader Starter Kit includes four disks with up to 200 quizzesand costs approximately $399. A Multi-User School License Kit for up to200 students costs $1,499.c

a Advantage Learning Systems, Inc., “Annual Report,” Securities and Exchange Commission Form 10-K, March 1, 1999, p. 1.bIbid., p. 3.cAdvantage Learning Systems, Inc., “Fall 1999 Catalogue.”

24

Table A.5DeVry, Inc.

Company history DeVry was founded in 1931, at which time it offered courses in radio,television, and sound systems. Today DeVry is one of the largest publiclyheld, international, higher education companies.

Service description DeVry offers undergraduate, graduate, and “lifelong” learning pro-grams that are designed to provide career-oriented skills. DeVry offers bach-elor’s degrees in electronics engineering technology, computer informationsystems, telecommunications management, accounting, technical manage-ment, and business administration and an associate degree in electronics.• DeVry hires faculty with related professional experience, uses lab sessions

with modern technologies, and runs classes that focus on “hands-onapplication” designed with input from representatives of leading compa-nies.

• Class schedules are flexible to meet the needs of adult students who work:courses are offered at night and during the summer so that a full-time stu-dent seeking a bachelor’s degree can obtain one in three years; a part-timestudent can obtain one in five years.

Market penetration DeVry Institutes are located on 16 campuses and serve nearly 38,000full- and part-time students.

Results DeVry offers an employment assistance program for its graduatesand boasts that more than 90 percent of its graduates who pursueemployment have a job within 180 days of graduation.

Cost Tuition varies depending on the degree pursued; however, a typicalsemester costs about $4,200. The number of required semesters also variesdepending on the degree; however, most degrees require eight semesters.a

aSee http://www.devry.edu/f_admis_info.html.

25

Table A.6Kaplan, Inc.

Company history Kaplan, a wholly owned subsidiary of the Washington Post Company, hasbeen offering standardized test preparation assistance for 60 years.

Service description Kaplan has expanded its business to offer a multitude of educational services. • Kaplan offers test preparation over the Internet at www.kaptest.com. • SCORE! Prep, Kaplan’s high school tutoring agency, assists students with

academic subjects and in preparation for standardized tests such as thePSAT, SAT, ACT, and SAT IIs.

• Kaplan’s after-school educational centers, SCORE! Educational Centers,for K–10 students combine academics with a sports-oriented environ-ment. Centers are staffed with “academic coaches,” typically graduates oftop universities.a

• Kaplan’s Concord University School of Law is the nation’s first online lawschool.

• KaplanCollege.com offers nearly 500 online professional developmentcourses, courses that count toward degrees, and certification courses.

• Kaplan offers employee training and educational services for employers aswell as recruiting and job placement services.

• Kaplan works directly with K–12 and postsecondary schools to improvestandardized test results, offering professional development for teachersand advice on curriculums.

• Kaplan’s brand name is leveraged for publishing books and software ontest preparation, admissions, and education.

Market penetration Kaplan has served 3 million students in the last 60 years. Kaplan has approx-imately 1,200 classroom locations worldwide, including 27 centers in 18countries outside North America.b

Results A research report done on Kaplan’s behalf found that the average scoreimprovement was 120 points for all students who had taken Kaplan’s SATcenter–based course and 140 points for students who attended all classesand completed their homework. Almost 30 percent of students in Kaplan’sSAT center–based courses improved by 170 points or more.c

Cost Costs for Kaplan classes vary with the service provided; however, most coursescost roughly $800.d Costs of online services also vary but typically rangefrom $300 to $500.e

a See http://www.aboutkaplan.com/.b Ibid. c Information provided by Katherine Engstrom, publicist at Kaplan, July 11, 2000.d Estimate obtained from http://www.kaptest.com/view/enroll/area/1,2887,557-557,00.html.e See http://www.kaptest.com/view/article/0,1898,3970,00.html.

Notes1. Michael T. Moe, Kathleen Bailey, and RhodaLau, The Book of Knowledge: Investing in the GrowingEducation and Training Industry, Merrill Lynch &Co., Global Securities Research & EconomicsGroup, Global Fundamental Equity ResearchDepartment, Report 1400, April 9, 1999, p. 9.

2. Ibid., p. 23.

3. Ibid., p. 24.

4. Ibid., p. 74.

5. U.S. Department of Education, National Centerfor Education Statistics, Digest of Education Statistics1999 (Washington: Government Printing Office,2000), Table 2, p. 11, Table 5, p. 14. Cited hereafteras Digest of Education Statistics 1999.

6. Moe, Bailey, and Lau, p. 24.

7. “America’s Education Choice,” The Economist,April 1, 2000, p. 17.

8. Digest of Education Statistics 1999, p. 29.

9. Ibid., p. 30.

10. George A. Clowes, “Education and Choice:What Does America Think?” School Reform News,March 2000, pp. 6–7.

11. See http://www.uscharterschools.org/gen_info/gi_main.htm.

12. Ibid.

13. See http://www.scholarshipfund.org/index.asp.

14. See http://www.hslda.org/central/faqs/index.stm.

15. Moe, Bailey, and Lau, p. 23.

16. The Department of Education estimates that47,244,000 or approximately 88 percent, of the53,215,000 K–12 students were enrolled in publicschools in 1999. Digest of Education Statistics 1999,Table 2, p. 11.

17. For instance, Helen Ladd, Holding SchoolsAccountable (Washington: Brookings Institution,1996), p. 2-3, suggests that per pupil spending didnot effectively increase by 50 percent from 1974to 1992 as the raw data suggest. She notes thatincreased mandatory spending on special educa-tion distorts per pupil spending. She also men-tions the potential effects of the changingAmerican family—fewer stay-at-home mothers

may create additional burdens on teachers, result-ing in fewer resources available for traditionalschooling. Another factor often named as con-tributing to the decline in public school perfor-mance is the dominance of teachers’ unions thatmake it extremely difficult for schools to fireunsatisfactory teachers and to create incentivestructures, like merit pay, to reward good teach-ers.

18. Lewis J. Perelman, School’s Out (New York:William Morrow, 1992), p. 225.

19. William C. Symonds, Anne Therese Palmer,and Jessica McCann, “For-Profit Schools,”Business Week, February 7, 2000, p. 66.

20. Alex Molnar, Jennifer Morales, and AlisonVander Wyst, “Profiles of For-Profit EducationManagement Companies 1999–2000,” Center forEducation Research, Analysis, and Innovation,University of Wisconsin–Milwaukee, CERAI-00-02, March 6, 2000, p. 1. Symonds, Palmer, andMcCann, p. 66, estimate that there are 200 for-profit schools. Jay Mathews estimates that for-profit companies run 250 of the U.S. publicschools. Jay Mathews,“New School of Thought:Making Education Pay; For-Profit Initiative HasBacking,” Washington Post, April 19, 2000, p. E01.

21. Moe, Bailey, and Lau, p. 74.

22. William G. Howell and Paul E. Peterson,“School Choice in Dayton, Ohio: An Evaluationafter One Year,” Paper prepared for theConference on Vouchers, Charters and PublicEducation, sponsored by the Program onEducation Policy and Governance, HarvardUniversity, February 2000, p. 16.

23. Paul E. Peterson, David Myers, and William G.Howell, “An Evaluation of the New York CitySchool Choice Scholarship Program: The FirstYear,” Program on Education Policy andGovernance, Harvard University, October 1998;Paul E. Peterson, David Myers, and William G.Howell, “An Evaluation of the HorizonsScholarship Program in Edgewood IndependentSchool District, San Antonio, Texas: The FirstYear,” Program on Education Policy andGovernance, Harvard University, September1999; and Jay P. Greene, William G. Howell, andPaul E. Peterson, “An Evaluation of the ClevelandVoucher Program after Two Years,” Program onEducation Policy and Governance, HarvardUniversity, June 1999.

24. Edison Schools, “Prospectus,” New York,November 10, 1999.

25. Ibid.

26

26. Ibid., p. 45.

27. Ibid., p. 44.

28. See http://www.heritageacademies.com/academies.htm.

29. See http://www.heritageacademies.com/academies_program.htm.

30. Ibid.

31. See http://www.heritageacademies.com/whynha_excellence.htm. Many factors may contribute tothe high test scores of students at the NationalHeritage Academies. For example, it is likely thatthe parents of those students are highly committedto their children’s education, which is likely to havea positive impact on student performance. It is alsopossible that the students attending NationalHeritage Academies come from families of above-average socioeconomic status. Student ability andprior education also influence student gains.Therefore, one cannot conclude that any studentplaced in a National Heritage Academies schoolwould necessarily achieve those gains. However,the results suggest that National HeritageAcademies schools are fulfilling their mission.

32. See http://www.heritageacademies.com/news_events/dsp_news.asp?nid=34.

33. SABIS Educational Systems, Inc., “SABISEducational Systems, Inc.: Providing World ClassPrimary and Secondary Education for over 100Years,” Eden Prairie, N.Mex., n.d.

34. SABIS Educational Systems, Inc., “SABISEdge Program Description,” 1998, p. 1.

35. SABIS Educational Systems, Inc., “TheInternational School of Minnesota,” 1997.

36. Bright Horizons Family Solutions, “1998Annual Report,” Watertown, Mass., andNashville, Tenn., p. 5.

37. See http://www.brighthorizons.com/client/main.html.

38. See http://www.brighthorizons.com/family/curriculum.html. Individual elements of the edu-cational program include Language WORKS!, areading and language development program;MindPlay, a science, math, and discovery pro-gram; Our World, a program designed to helpchildren appreciate and understand other cul-tures; and Projections, a project-based program.

39. Bright Horizons Family Solutions, p. 10.

40. Information provided by Joy McAndrew, vice

president of marketing, Nobel LearningCommunities, July 11, 2000.

41. Nobel Learning Communities, “You Can SeeSuccess in the Faces of Our Children,” Media, Pa.,August 1999.

42. Ibid., p. 20.

43. Nobel Learning Communities, “Success Iswithin Reach,” n.d. Information is also availableat http://www.paladinacademy.org.

44. For example, in Sacramento, California, with14 schools reporting, students in the third gradeat Nobel schools received a 4.9 in reading and a4.7 in math, which implies that they are perform-ing at close to a fifth-grade reading level. NobelLearning Communities, “Annual Report1998/1999,” “Spelling It Out,” p. 7.

45. Nobel Learning Communities, “HoustonLearning Academy,” n.d.

46. See, for example, Barbara Hall, “OpinionRemains Divided on Charter Schools,” BostonSunday Globe, April 30, 2000, p. J9.

47. For instance, the charter management compa-ny Edison Schools has in its prospectus a sectiontitled “Risks Related to Government Funding andRegulation of the Education Industry.” Edisonwarns investors that charter schools receivemoney from the government and therefore face“requirements as to eligible students and allow-able activities.” Edison Schools, pp. 16–17.

48. Ibid., p. 10.

49. Lisa Gondering, “Parents Fret about TesseracT’sFuture,” Arizona Republic, March 1, 2000, p. 10.

50. See http://www.tesseractgroup.org/tesseract.html.

51. TesseracT Group, “Quarterly Report,”Security and Exchange Commission Form 10-Q,February 22, 2000.

52. Gondering, p. 10.

53. See, for example, John Sall, “Charter SchoolFails the Test, Shuts Doors,” Chicago Sun-Times,January 17, 1999, p. 11; and Debbi Wilgoren,“After Charter School Closing, Some Wait for Pay,Transcripts,” Washington Post, July 20, 1999, p. B2.

54. Perelman, p. 20.

55. President’s Committee of Advisors on Scienceand Technology, Panel on EducationalTechnology, “Report to the President on the Use

27

of Technology to Strengthen K–12 Education inthe United States,” March 1997, pp. 2–3,http://www.whitehouse.gov/WH/EOP/OSTP/NSTC/PCAST/k-12ed.html.

56. Scientific Learning Corporation, “NationalFieldTrial Results,” n.d., p. 3, http://www. scientificlearning.com.

57. Scientific Learning Corporation, “Prospectus,”Berkeley, Calif., July 21, 1999, p. 3.

58. Scientific Learning Corporation, “PhiladelphiaPublic School Study Shows Fast ForWord(R) and4wd(TM) Produce Gains of Three-and-a-Half Yearsin Just Weeks,” Press release, July 13, 2000, http://biz.yahoo.com/prnews/000713/ca_sci_lea.html.

59. Sharon Begley, “Rewiring Your Gray Matter,”Newsweek, January 1, 2000.

60. Advantage Learning Systems, Inc., “AnnualReport,” Securities and Exchange CommissionForm 10-K, March 1, 1999, p. 1.

61. Ibid., p. 3.

62. TRO Learning, “TRO Learning: PLATO,”Edina, Minn., 1999, p. 1.

63. See http://www.apex.netu.com.

64. Nationally, only 50 percent of students whotake traditional AP courses actually sit for theexams. Information provided by Stacey Giard,associate product marketing manager, ApexLearning, July 6, 2000.

65. Ibid.

66. Ibid.

67. Advantage Learning Systems, Inc., p. 1.

68. Jennifer Mateyaschuk, “IT Skills Gap DemandsAction—Proper Training and CollaborativeEducation Are Keys to the Growing Need for ITTalent,” Information Week, July 5, 1999, http://www.informationweek.com/741/labor.htm.

69. Jefferies & Company, Inc., “Provant, Inc.,” EquityResearch Report, Los Angeles, February 8, 2000, p. 8.

70. Ibid., p. 111.

71. Wolfram, p. 2.

72. Ibid., p. 18.

73. Moe, Bailey, and Lau, p. 125.

74. Ibid., p. 110.

75. DeVry, Inc., “Investor’s Information Report,”Fact sheet from National Association of InvestorsCorporation, August 1999.

76. Ibid.

77. DeVry, Inc. “Education for a New Age,”Oakbrook Terrace, Ill., 1998, p. 6.

78. DeVry, Inc. “Employment Statistics forGraduates of U.S. DeVry Institutes,” Fact sheet,October 1999.

79. Strayer Education, “Annual Report 1998,”Washington, p. 1.

80. ITT Education Services, “Backgrounder,” Factsheet, Indianapolis, n.d.

81. Education Management Corporation,“Annual Report,” Securities and ExchangeCommission Form 10-K, June 30, 1999, p. 2.

82. Ibid.

83. U.S. Department of Education, NationalCenter for Education Statistics, The Condition ofEducation 1999 (Washington: GovernmentPrinting Office, 1999), p. 66.

84. James W. Michaels and Dirk Smillie,“Webucation,” Forbes, May 15, 2000, p. 92.

85. Moe, Bailey, and Lau, p. 120.

86. Apollo Group, “1999 Annual Report,”Phoenix, p. 4.

87. Information provided by Eric McHaney,University of Phoenix Online, Phoenix, July 10, 2000.

88. See http://www.online.uophx.edu.

89. Students pay per credit hour; a student pursu-ing an undergraduate degree pays $390 per credithour; a graduate student pays $485 per credithour. Typically 60 credits are needed to graduatewith a bachelor’s degree. However, students maybe able to transfer previous credits and can earn upto 30 semester credits by taking an exam such asthe College Board Level Examination.

90. Digest of Education Statistics 1999, Table 318,p. 346.

91. Wolfram, p. 1.

92. Information provided by Liz Lindsey, directorof public relations at Kaplan, July 6, 2000.

93. Concord University School of Law, “ConcordUniversity School of Law,” p. 4. Further information

28

can be accessed at http://www.concord.kaplan.edu.

94. Lindsey.

95. Ibid.

96. Concord University School of Law, p. 3.

97. Amy Dockser Marcus, “Seeing Crimson: WhyHarvard Law Wants to Rein in One of Its StarProfessors,” Wall Street Journal, November 22,1999, p. A1.

98. Lindsey.

99. Howell and Peterson; Peterson, Myers, andHowell, “An Evaluation of the New York CitySchool Choice Scholarship Program”; Peterson,Myers, and Howell, “An Evaluation of theHorizons Scholarship Program in EdgewoodIndependent School District, San Antonio,Texas”; Greene, Howell and Peterson; and JayMathews, “Scores Improve for D.C. Pupils withVouchers,” Washington Post, August 28, 2000.

100. Perelman, pp. 184–85.

101. Ibid., p. 307.

102. Bob Chase, president of the NationalEducation Association, quoted in Mark Walsh,“Report Card on For-Profit Industry StillIncomplete,” Education Week 19, no. 16 (December15, 1999): 14–16.

103. Florida Department of Education, “Writing at78 Schools Improves Substantially; Scores IncreaseEnough to Eliminate Need to Issue OpportunityScholarships,” News release, June 19, 2000,http://www.firn.edu/doe/bin00031/000619.htm.

104. Nicholas Lemann, “A False Panacea,” Review

of Politics, Markets, and America’s Schools, by John E.Chubb and Terry M. Moe, Atlantic Monthly,January 1991, p. 101.

105. See Phil Vassallo, “More Than Grades: HowChoice Boosts Parental Involvement and BenefitsChildren,” Cato Institute Policy Analysis no. 383,October 26, 2000.

106. Andrew Coulson, Market Education: TheUnknown History (New Brunswick, N.J.:Transaction, 1999), p. 166.

107. Ramesh Ponnuru, “Fighting Words; Why theReading Wars Aren’t Over,” National Review,September 13, 1999, pp. 34–38.

108. Chase, quoted in Walsh, pp. 14–16.

109. See http://www.aboutkaplan.com.

110. Alex Molnar, author of Giving Kids theBusiness, quoted in Julie Light, “The EducationIndustry: The Corporate Takeover of PublicSchools,” July 8, 1998, www.corpwatch.org/trac/feature/education.

111. Patricia L. Donahue et al., The NAEP 1998Reading Report Card for the Nation and the States,NCES 1999-500, U.S. Department of Education,Office of Educational Research and Improvement,National Center for Education Statistics(Washington: Government Printing Office, March1999), p. 3.

112. Digest of Education Statistics 1999, p. 187; andDale McDonald, “United States CatholicElementary and Secondary School Statistics1999–2000: Synopsis of the Annual StatisticalReport on Schools, Enrollment and Staffing,”National Catholic Educational Association,Washington, 2000.

29

Published by the Cato Institute, Policy Analysis is a regular series evaluating government policies and offer-ing proposals for reform. Nothing in Policy Analysis should be construed as necessarily reflecting the viewsof the Cato Institute or as an attempt to aid or hinder the passage of any bill before congress. Contact theCato Institute for reprint permission. Additional copies of Policy Analysis are $6.00 each ($3.00 each for fiveor more). To order, or for a complete listing of available studies, write the Cato Institute, 1000 MassachusettsAve., N.W., Washington, D.C. 20001, call toll free 1-800-767-1241 (noon - 9 p.m. eastern time), fax (202) 842-3490, or visit our website at www.cato.org.