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Regulatory Environment for Education Sector

There is little regulatory control of establishments operating in this industry. There is no centralized government authority and states assume varying degrees of responsibility for regulation. In general, businesses are able to operate with considerable independence and autonomy.

Industry operators are not required to participate in accreditation programs, though some choose to in order to establish and maintain a good reputation. For example, Educate’s Sylvan Learning Center was the first supplemental education provider to earn accreditation by the Commission on International and Trans-Regional Accreditation (CITA). Accredited schools must abide by various rules and regulations, certifying that they meet standards of educational quality.

No Child Left Behind Act

Under the No Child Left Behind Act of 2001 (NCLB), the federal government provides funding to school districts to supply free after school tutoring to low income students attending a failing school. Eligible students can seek free tutoring from a list of state approved providers of supplemental educational services (SES). Approved tutoring operators have a responsibility under the NCLB legislation to provide course content that is adequate to achieve certain educational gains and maintain confidentiality of student records. They must also report student progress to the local educational agency and to parents. In addition, instruction must be secular, neutral and non-ideological.

Lack of regulation

There have been some concerns about a lack of regulation, potential for fraud, mismanagement and aggressive marketing by tutoring firms trying to get a piece of the lucrative federally funded SES business. The state of New Jersey even had reported cases of SES providers offering signing bonuses to students. In response to the problem, the Education Industry Association drafted a code of ethics for the tutoring industry. Many tutoring companies have adopted the code. Those working in driver education training must be licensed by the relevant state government authority, whether they are employed by or own a driving school. The requirements to obtain a license vary from state to state but generally include a background check and a written examination.

Discretionary Spending Category

Many of the services of this industry fall into the discretionary spending category and so revenue is subject to changes in the level of disposable income. Per capita disposable income increased steadily to 2007, leading to greater demand for other educational services. However, from late 2007 onward, economic slowdown and rising unemployment have eroded growth in disposable income. Consequently, the recession impacted revenue growth for operators that provide classes affected by discretionary spending, such as yoga classes. Nevertheless, an increased emphasis has been placed on scholastic education, increasing demand for tutoring and exam preparation services. Furthermore, as this industry consists of many different segments, a decline in revenue in one segment is often offset by an increase in another segment, therefore reducing the industry’s volatility. Demographic trends also underpin the industry, contributing to low volatility.