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Education Profiteering; Wall Street's Next Big Thing?

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""You start to see entire ecosystems of investment opportunity lining up," Rob Lytle, an business consultant earlier this year told a meeting of private equity investors interested in for-profit education companies. According to Stephanie Simon of Reuters, who reported on the event, investment in for profit education has already jumped from $13 million in 2005 to $389 million in 2011. Among others, Goldman Sachs and JP Morgan Chase have created multimillion- dollar funds for education investments.

These "data-driven" investors are not so much interested in students' scores, as in the opportunities to cut costs by using online technology. Ironically, while reformers insist their goal is to develop more skilled teachers, a goal of their financier allies is to get rid of them. The central question, says education entrepreneur John Katzman is "How do we use technology so that we require fewer qualified teachers?"

According to none other that Rupert Murdoch, the U.S. education industry represents a five hundred billion dollar opportunity for investors. In 2010, he hired prominent reformer Joel Klein from his post as chancellor of the New York City Department of Education to run Murdoch's education technology company. A few months later the firm received a $2.7 million contract from the city."

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