Despite Barriers, 'Edupreneurs' Flood into Education Marketplace

Despite Barriers, 'Edupreneurs' Flood into Education Marketplace
March 1, 2001

A new study from the Cato Institute reports that large numbers of education companies, or "edupreneurs," are entering the education marketplace with creative, cost-efficient products and services for students of all ages.

Despite having to compete against a government-protected monopoly in the K-12 market segment, the for-profit portion of the $740 billion education market is expanding rapidly and today commands roughly 10 percent of revenues.

The Cato study, titled "'Edupreneurs': A Survey of For-Profit Education," was released last November. It demonstrates that private enterprises can deliver a wide range of affordable and high-quality educational services. It also offers a glimpse of the products, services, and innovations that a fully competitive marketplace could generate if restrictions over private-sector participation in K-12 education were loosened.

"Edupreneurs" employ a variety of business strategies, according to the Cato report, depending on the nature of their product and the market segment they have chosen to serve. For example, established companies such as Kaplan, which traditionally prepared high school students for standardized tests, are expanding their educational services internationally, across age groups, and through new media.

DeVry and the Apollo Group are making postsecondary education more convenient and affordable, thereby reducing some of the barriers that have traditionally prevented adults from pursuing higher degrees. Scientific Learning is developing products to help children to overcome speech impediments.



Tough Row to Hoe

The study's author, former Cato Institute policy analyst Carrie Lips, points out that the structure of the American educational system creates considerable obstacles for companies that would like to offer complete kindergarten through 12th grade services. That's because entrepreneurs attempting to open schools face regulatory barriers and competition from "free" government schools supported by state and local taxes.

If the children in America's education marketplace are to benefit more fully from the innovative ideas of educational entrepreneurs, new policies are required that would begin to loosen the government's monopoly grip on K-12 education. Lips recommends eliminating the current financial biases against edupreneurs by adopting policies that would return education purchasing power to individuals--policies such as tax cuts and universal tuition tax credits.




For more information . . .

Cato Policy Analysis No. 386 by Carrie Lips, "'Edupreneurs': A Survey of For-Profit Education," issued on November 20, 2000, is available from the Cato Institute Web site at www.cato.org/pubs/pas/pa-386es.html.