US Educational Services Sector

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 154,903 educational services establishments in the US provide instruction and training across a wide variety of subjects. The sector consists of formal educational services providers (elementary and secondary schools, colleges, universities) and specialized education services providers (technical and trade schools, tutoring services).

Demographic Challenges

The declining birth rate and smaller families have led to a gradual decline in the number of children in the US, a factor that affects school enrollment and revenue from government sources.

Dependence on Government Funding

Public K-12 schools and universities are highly dependent on public sources of funding.

Industry size & Structure

The educational services sector is comprised of 154,903 establishments that employ 3.6 million workers and generate $93 billion in annual revenue, according to government sources.

    • The educational services sector represents 1% of the nation's Gross Domestic Product (GDP) and employs 2.9% of the country's workers.
    • The sector is fragmented with the 20 largest firms representing 15.2% of revenue.
    • In addition to employer establishments, the educational services sector has 895,000 owner-operated establishments with no employees. The owners of nonemployer firms typically perform the work and may outsource support functions like marketing and accounting.
    • The education and health services sectors shed 167,000 establishments in 2021, which equals about 8.2% of existing establishments, according to the Bureau of Labor Statistics. However, the two sectors added about 250,000 new establishments, which is equivalent to 12.3% of existing establishments. As a result, the sectors had a growth rate of 4.1%.
    • The education services sector is forecast to grow its employment base by 5.8% overall in 2021-2031, which is comparable to the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
                                    Industry Forecast
                                    US Educational Services Sector Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    May 19, 2024 - Moderate Sales Growth Expected
                                    • Educational services sector sales are forecast to increase at a 4.12% compounded annual rate from 2024 to 2028, comparable to the growth of the overall economy, according to Inforum and the Interindustry Economic Research Fund, Inc. Sector employment continued rebounding during 2023 and exceeded pre-pandemic levels in early 2024, according to the US Bureau of Labor Statistics.
                                    • Elite higher education institutions — selective schools that draw from national applicant pools — will still be able to fill classes with qualified students when an expected multiyear decline in the number of traditional-age college students begins, according to Carleton College professor Nathan Grawe, author of Demographics and the Demand for Higher Education. Less prestigious four-year colleges and two-year colleges, which tend to draw students living locally, will suffer most from the so-called "demographic cliff". The consensus view is that America will hit a peak of around 3.5 million high-school graduates sometime near 2025, according to The Chronicle of Higher Education. The college-going population is then expected to shrink across the following five to 10 years by as many as 15 percentage points. Decreasing enrollment is problematic because most schools depend heavily on tuition, so the finances of a college that has fewer students than it is capable of serving are negatively impacted. Ernst and Young’s consulting arm EY Parthenon estimated in 2020 that excess capacity at US postsecondary schools is costing schools between $27 billion and $51 billion annually. Schools often raise tuition or decrease offerings to cover the deficit. Schools that are financially unstable are more likely to shut down.
                                    • Experts concerned about a looming higher education enrollment cliff that is expected to bring a massive decrease in traditional-aged students have proposed solutions and tactics including embracing artificial intelligence and pursuing personalized learning bolstered by microcredentials. “We’re at a unique moment where it’s a once-in-a-generation time to reinvent higher education,” Bob Hansen, UPCEA (formerly known as the University Professional and Continuing Education Association) chief executive officer, told Inside Higher Ed. AI expert Ian Khan notes that “We’re at the very beginning of an AI revolution and you have got to be ready for what’s coming. We need to accelerate our pace just a little bit to be in pace with the times.” Microcredentials are seen as key to personalized learning, which aims to support students’ various wants and needs, versus a standardized approach. Microcredentials allow students to learn or showcase a skill within a course. That skill can be added to résumés or shared on social media accounts and used by students to market themselves.
                                    • The 2023-24 school year is the last full year in which districts can spend down what remains of the $180 billion in federal Covid-19 aid. “The loss of some of that money will destabilize districts,” said Marguerite Roza, the director of Edunomics Lab, a Georgetown University research center. “They have this complicated task this year of hurrying to spend it down while simultaneously planning for it to be gone.” High-poverty districts typically received more emergency relief and now face steeper cuts as the money runs out.
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