A winning recipe

IN THE United States worries about private, for-profit universities’ high cost and dubious quality abound. A congressional inquiry in 2012 acknowledged that the sector, which trebled enrolment during the previous decade, gave students who were older, poorer and often less well-prepared for further study than those at public or non-profit institutions their best chance of a degree. But it concluded that soaring fees and drop-out rates meant that a majority left with nothing more than extra debt.

Elsewhere in the Americas, though, the story is far more positive. After equally hectic expansion, Brazil’s for-profit institutions have three-quarters of the country’s higher-education market—and fees are low and quality is rising fast. And since a degree boosts wages by a bigger multiple in Brazil than in any other country tracked by the OECD, a club of mostly rich countries, graduates can make back their tuition fees in just a few years.

Soon Brazil will become home not only to the world’s liveliest for-profit education sector, but to its biggest for-profit higher-education firm, too. Last month the antitrust regulator, CADE, approved the purchase by Kroton, the biggest such firm in Brazil, of Anhanguera, the second-biggest, to create a giant with a stockmarket value of around 18 billion reais ($8 billion).

“Quality [in education] is easy,” says Rodrigo Galindo, Kroton’s energetic young boss. “And so is quantity. What’s difficult is combining the two.” The trick, he explains, is to abandon “handcrafted” teaching methods for scalable ones: online course materials and tutors; star teachers’ lessons broadcast by satellite; tightly specified franchise agreements with hundreds of local teaching centres staffed by moderators. The company has invested heavily in “adaptive” learning materials—computerised courses that react to users’ progress by offering further explanation and examples where answers suggest they are struggling, and moving on swiftly where they are not.

Unopar, a university in Londrina, a foggy city in the south-eastern state of Paraná, was bought by Kroton in 2011 and is one of its best-known brands. A decade ago it became the first institution in Brazil to get federal accreditation for the distance-training of teachers. It soon realised that other degrees could be offered with the same combination of high-quality online materials and weekly attendance at seminars at a local centre. It is now Brazil’s biggest provider of distance higher-education, with 150,000 students registered at nearly 500 centres nationwide. The most remote, with 300 students, is in Oriximiná in the Amazonian state of Pará, accessible only by light plane or a 12-hour boat ride from Manaus, the region’s main city.

“These courses aren’t easy,” says Elisa Assis, Unopar’s director for distance education. “What they are is flexible.” Web-only courses often have high drop-out rates, she explains. One reason for the weekly get-togethers, during which students watch a class broadcast from headquarters followed by a moderated discussion, is to keep students engaged and on track. Their questions give the university instant feedback on how each lesson went, allowing it to improve the course.

Brazil’s got teaching talent

Anhanguera is better known for on-campus tuition, generally in the evenings to fit around students’ work. At its campus in Vila Mariana, a middle-class district of São Paulo, it has a media centre with a dozen studios, from which hour-long lessons are broadcast to other university centres across Brazil. Teachers who could work well on screen are talent-spotted and given media training. “It’s like running a pay-TV network with 39 channels,” says Luciano Possani, the company’s chief information officer, who used to work for the Brazilian arm of America’s DirecTV.

Huge purchasing power means big discounts for learning materials. Anhanguera negotiates with publishers to provide textbooks for as little as a fifth of the standard price. Its customers, like Kroton’s, are mostly first-time buyers: from working-class families with parents who never finished, or in some cases even started, school. Monthly fees are around 400 reais for courses taught on campus; 250-300 reais for those taught at a distance.

Public institutions are constitutionally barred from charging fees; they are therefore harder to get into and largely colonised by the well-off. But in the future even those who currently turn up their noses at the private sector may turn to it, argues Mr Possani. Lecturers at Brazil’s public universities are often on strike and courses rarely have much to do with the world of work. With no need to serve the customer, quality is hit-and-miss. “Traditional lectures can be good or bad, depending on the lecturer, or the day,” he says. “It’s like the difference between live television and film.”

Though today its for-profit higher education sector is in rude health, Brazil, too, has lived through soul-searching about its quality. In the 1990s more youngsters were staying on in school and as a result demand for higher education grew. The high cost of fully funding public institutions meant that private-sector expansion was the only option. But with little government oversight and inexperienced clients, the sector’s reputation was tarnished by fly-by-night operators offering worthless degrees.

Since then, sensible rules and incentives have turned things round. Most of those studying for a degree in Brazil take a standard exam set by the federal education ministry, which publishes the average grade for each course. Good evaluations feature prominently in marketing materials. And, crucially, students are only eligible for subsidised government loans to study on courses that come out well. That gives firms a big incentive not to admit those who are likely to struggle. A separate government scheme offers tax breaks for institutions that admit around a tenth of their students on scholarships. Since only school-leavers with good grades are eligible, that pushes standards up too.

Neither Kroton nor Anhanguera is thinking about expanding abroad, at least for now. That all their teaching materials are in Portuguese is one reason; another is that the pickings at home are still so juicy. Of every 100 Brazilian children who start primary school, only 57 go on to finish secondary school—and just 14 enroll in higher education. More than 12m of those aged 25 to 34 finished secondary school but neither possess nor are studying for a higher-level qualification. With so much room left to grow, Brazil seems to have hit on for-profit education’s winning recipe.