STRAYER EDUCATION INC, S-1/A, 1996-07-24

STRAYER EDUCATION INC
S-1/A, 1996-07-24
EDUCATIONAL SERVICES

Previous: BANC ONE ABS CORP, 8-K, 1996-07-24

Next: CORESTATES HOME EQUITY LOAN TRUST 1996-1, 8-K, 1996-07-24

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1996

REGISTRATION NO. 333-3967
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 4

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

STRAYER EDUCATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)

8221
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)

52-1975978
(I.R.S. EMPLOYER
IDENTIFICATION NO.)

1025 15TH STREET, N.W.
WASHINGTON, D.C. 20005
(202) 408-2400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

RON K. BAILEY
PRESIDENT
STRAYER EDUCATION, INC.
1025 15TH STREET, N.W.
WASHINGTON, D.C. 20005
(202) 408-2400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:

WALTER G. LOHR, JR.
HOGAN & HARTSON L.L.P.
111 S. CALVERT STREET, SUITE 1600
BALTIMORE, MD 21202
(410) 659-2700
RICHARD J. PARRINO
SHAW, PITTMAN, POTTS & TROWBRIDGE
2300 N STREET, N.W.
WASHINGTON, DC 20037
(202) 663-8000

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED JULY 24, 1996

PROSPECTUS

3,000,000 SHARES

STRAYER LOGO

STRAYER EDUCATION, INC.
COMMON STOCK
------------------------

All of the shares of Common Stock, $.01 par value (the "Shares"), offered
hereby are being offered (the "Offering") by Strayer Education, Inc. (the
"Company"). Prior to the Offering, there has been no public market for the
Common Stock of the Company. Approximately $19.7 million of the net proceeds of
the Offering will be used to make payments to affiliates of the Company. See
"Use of Proceeds." It is currently estimated that the initial public offering
price will be between $9.00 and $11.00 per Share. See "Underwriting" for factors
considered in determining the initial public offering price.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "STRA" upon notice of issuance.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)

<CAPTION>
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- ----------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting expenses of the Offering estimated at $ payable by
the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 450,000 additional Shares from the Company on the same terms and
conditions as set forth above solely to cover over-allotments, if any. If
the Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount, and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

------------------------

The Shares are offered by the Underwriters subject to prior sale, when, as
and if issued to and accepted by them, subject to their right to reject any
order in whole or in part and to certain other conditions. The Underwriters
reserve the right to withdraw, cancel or modify such offer and to reject offers
in whole or in part. It is expected that delivery of certificates for the Shares
will be made at the offices of Legg Mason Wood Walker, Incorporated, Baltimore,
Maryland, on or about , 1996.

------------------------

LEGG MASON WOOD WALKER
INCORPORATED

, 1996
<PAGE> 3

[MAP OF GREATER WASHINGTON D.C. AND SURROUNDING AREA INDICATING
CAMPUS LOCATIONS AND PICTURES OF EACH OF THE EIGHT CAMPUS
FACILITIES INSERTED HERE]

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited financial information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary information is qualified in its entirety by the more
detailed information and financial statements and notes thereto appearing
elsewhere in this Prospectus. Except as otherwise indicated herein, (i) the
information in this Prospectus assumes an initial public offering price of
$10.00 per Share and no exercise of the Underwriters' over-allotment option and
(ii) all references to the Company in this Prospectus include Strayer Education,
Inc. and the business and properties of Strayer College, Inc., a Maryland
corporation ("Strayer" or the "College"), and Education Loan Processing, Inc., a
Virginia corporation ("ELP"), each of which, as a result of the plan of
reorganization (the "Reorganization") described under "Reorganization," will
become a wholly-owned subsidiary of Strayer Education, Inc. Pursuant to the
Reorganization, among other things, the status of the College and ELP as S
Corporations under the Internal Revenue Code of 1986 will be terminated and the
College will make the S Corporation Distribution (as defined herein) to its
current stockholders. All references herein to the College's Financial
Statements are to the combined financial statements of the College and ELP
included in this Prospectus.

THE COMPANY

Strayer is a regional proprietary institution of higher education offering
undergraduate and graduate degree programs to more than 7,000 students at eight
campuses in Washington, D.C. and Northern Virginia. In early 1996, the College
received state approval to operate its first degree-granting campus in Maryland.
The College is accredited by the Commission on Higher Education of the Middle
States Association of Colleges and Schools ("Middle States"), the regional
institutional accrediting body recognized by the U.S. Department of Education.
The majority of Strayer students are working adults pursuing their first college
degree to improve their job skills and advance their careers. Of students
enrolled in Strayer programs at the beginning of the 1995 Fall quarter,
approximately 57% were over the age of 30 and approximately 62% were engaged in
a part-time course of study. The College believes it attracts working adults by
offering a business-oriented curriculum, convenient campus locations, flexible
class schedules, a wide variety of information technology courses and an
experienced teaching faculty. Many employers of Strayer students, including
major corporations and governmental agencies, provide full or partial tuition
reimbursement for Strayer courses.

The College was founded as Strayers Business College in Baltimore, Maryland
in 1892. Strayer began a program of significant expansion in 1989 when its
current President, Ron K. Bailey, acquired ownership of the College. Since 1989,
the number of campuses has increased from three to eight, enrollment has
increased from approximately 2,900 students at the beginning of the 1990 Fall
quarter to approximately 7,400 students at the beginning of the 1995 Fall
quarter, and annual revenues have increased from approximately $11.3 million for
the year ended December 31, 1990 to approximately $38.2 million for the year
ended December 31, 1995. During the same period, the College focused its
attention on its degree programs by broadening its course offerings, increasing
the number of faculty members with doctoral and other terminal degrees,
expanding its library and other learning resources and investing in information
systems. The College also closed the Baltimore campus, which was not a
degree-granting institution.

The College designs its educational offerings to meet the practical needs
of its student body. Strayer regularly revises its curriculum in consultation
with area employers to respond to changing business trends and workplace
requirements. The College offers associate's, bachelor's and master's degree
programs in accounting, business administration, and computer information
systems, as well as undergraduate degree programs in related fields, such as
marketing and economics. The College has expanded and upgraded its
computer-related course offerings as business and governmental organizations
have increased their use of information technology. The College offers an
intensive twelve-month diploma program in computer information systems to
instruct students in new information technologies. Strayer has equipped each of
its campuses with computer and networking laboratories containing up-to-date
hardware and software for instructional use.

Strayer provides students with classroom locations close to their homes or
workplaces and flexible class schedules that make it easier for working adults
to attend classes. Strayer currently offers its courses at two campuses in the
District of Columbia and six campuses in Northern Virginia. The College plans to
open its first Maryland degree-granting campus in early 1997. To accommodate the
scheduling requirements of

3
<PAGE> 5

working students, Strayer offers classes seven days a week at hours ranging from
6:00 a.m. to midnight. In addition, Strayer operates throughout the year on a
quarter system, which enables many of its students to attend classes all year.

Strayer recently has taken additional steps to improve the accessibility of
its instructional programs. It currently operates programs on-site at the U.S.
Department of Transportation and at the General Services Administration, for
employees of the federal government; at Quantico Marine Base, Fort Belvoir Army
Education Center and Naval Surface Warfare Center, Dahlgren Division, for active
military personnel; and at Computer Sciences Corporation, in Falls Church,
Virginia, for company employees. The College has submitted a proposal to offer
graduate and upper level undergraduate courses at the Southern Maryland Higher
Education Center in California, Maryland. Strayer also offers an increasing
number of courses through the Internet, which may allow the College in the
future to expand its student population beyond the geographical areas served by
its campuses.

Students finance their Strayer education in a variety of ways. A
significant number of students utilize federal financial aid programs. In
addition, many of Strayer's working adult students finance their own education
or receive full or partial tuition reimbursement from their employers. Since
1995, Strayer has extended educational loans through an internal program, the
Strayer Education Loan Program (the "SEL Program"), to eligible students seeking
an alternative to federal programs. The SEL Program enables students to finance
their education through monthly payments of between $200 and $300 while they
attend college and after they graduate. The administrative costs of the SEL
Program to the College are substantially less than those of the federal loan
programs. In addition, the SEL Program reduces the College's dependence on the
receipt of federal financial aid funds.

The College believes that the demand of working adults for
business-oriented higher education in Strayer's market area will continue to
increase as the result of a number of demographic and economic trends. According
to the American Council on Education, older students are more likely to pursue
postsecondary education in professional fields, including business-related
studies, than in the arts and sciences. The U.S. National Center for Educational
Statistics estimates that by the year 2000 approximately 44% of the 15.5 million
students projected to be enrolled in institutions of higher education will be
adults over the age of 24. Currently, the U.S. Bureau of the Census estimates
that 70-75% of students over the age of 24 are working adults. Management
expects that the number of adult candidates for business and computer-related
education will increase due to the continuing restructuring of businesses and
federal governmental agencies and the rapid growth and change in information
technology.

The College seeks to strengthen its position as a leading provider of
business-oriented education for working adults in its market area. Strayer
believes it will attract additional students by establishing new campuses in
Maryland and elsewhere throughout its region, broadening its curriculum and
using new distance education technologies such as the Internet. The College
intends to expand the SEL Program to reduce its administrative costs, lessen its
dependence on federal student financial aid programs and enhance its ability to
attract and retain qualified students. The College also will consider the
purchase of one or more campus facilities in order to establish permanent campus
sites and to facilitate future expansion.

RISK FACTORS

The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered hereby..... 3,000,000 Shares
Common Stock to be outstanding
after the Offering............ 9,000,000 Shares(1)
Use of proceeds................. To fund the distribution to the College's current
stockholders of undistributed income taxable to them prior
to termination of Strayer's S Corporation status (the "S
Corporation Distribution"), to fund the Company's
acquisition of ELP (an education loan servicing company),
and to provide funds for ELP's operations and for other
corporate purposes.
Nasdaq National Market Symbol... "STRA"
</TABLE>

- ---------------
(1) Excludes 1,000,000 Shares reserved for issuance under the Company's stock
option plan. Upon the effectiveness of the Registration Statement of which
this Prospectus forms a part, the Company intends to grant to certain of its
employees options under the plan to purchase an aggregate of 700,000 Shares
at an exercise price equal to the initial public offering price set forth on
the cover page of this Prospectus. See "Management -- Stock Option Plan."

5
<PAGE> 7

SUMMARY FINANCIAL AND OPERATING INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------------------------------------- PRO
PRO FORMA
1991 1992 1993 1994 1995 FORMA 1995 1996 1996(3)
------- ------- ------- ------- ------- 1995(3) ----------- ----------- -------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................. $16,529 $23,793 $29,368 $34,257 $38,196 $38,196 $ 10,635 $ 12,415 $12,415
Costs and expenses(1)..... 14,449 21,298 25,124 29,055 32,020 25,845 7,691 7,787 7,787
------- ------- ------- ------- ------- ----------- ----------- ----------- -------
Income from operations.... 2,080 2,495 4,244 5,202 6,176 12,351 2,944 4,628 4,628
Investment and other
income.................. 186 184 180 350 875 875 148 108 108
------- ------- ------- ------- ------- ----------- ----------- ----------- -------
Net income(2)............. $ 2,266 $ 2,679 $ 4,424 $ 5,552 $ 7,051 $13,226 $ 3,092 $ 4,736 $ 4,736
======= ======= ======= ======= ======= ========= ======= ======= =======
PRO FORMA DATA:(3)
Pro forma income taxes.... $ 5,069 $ 1,852
Pro forma net income...... $ 8,157 $ 2,884
Pro forma net income per
share(4)................ $ 1.08 $ .38
Pro forma weighted average
shares outstanding(4)... 7,548 7,548
OPERATING DATA:
Enrollment(5)............. 4,000 5,600 6,200 6,800 7,400 6,500 7,100
Number of campuses........ 6 8 8 8 8 8 8
</TABLE>

<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------
AT DECEMBER 31, (UNAUDITED)
----------------------------------------------- PRO AS
1991 1992 1993 1994 1995 ACTUAL FORMA(6) ADJUSTED(7)
------- ------- ------- ------- ------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 2,572 $ 3,609 $ 2,191 $ 5,564 $ 8,992 $11,905 $ 9,806 $21,764
Working capital.......................... 1,625 3,063 5,195 5,934 9,571 10,944 (5,197 ) 20,803
Total assets............................. 10,465 14,396 16,279 19,824 25,878 29,607 27,508 39,466
Long-term liabilities.................... 605 62 -- -- -- -- -- --
Total liabilities........................ 7,636 10,146 9,651 10,487 10,539 11,043 25,085 11,043
Total stockholders' equity............... 2,829 4,250 6,628 9,337 15,339 18,564 2,423 28,423
</TABLE>

- ---------------

(1) Includes bonus payments to an S Corporation stockholder of the College of
$0.2 million in 1991, $0.9 million in 1992, $3.5 million in 1993, $5.5
million in 1994, $6.2 million in 1995 and $1.6 million in the three months
ended March 31, 1995 for the payment of income taxes by the S Corporation
stockholders on undistributed S Corporation income. No such bonus payments
were made during the three-month period ended March 31, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Background and Overview" and Note 3 to the College's Financial
Statements.

(2) Historical data does not reflect any provision for income taxes. The College
and ELP were S Corporations during the periods indicated and therefore were
not subject to income tax. See "Reorganization -- Termination of S
Corporation Status" and "-- Acquisition of ELP."

(3) Reflects the formation of the Company and the acquisition of the College by
the Company as if those events had taken place on January 1, 1995. See
"Reorganization -- Formation of Holding Company." Following the termination
of their status as S Corporations prior to completion of the Offering, the
College and ELP will become subject to federal and state income tax. See
"Reorganization -- Termination of S Corporation Status" and "-- Acquisition
of ELP." The pro forma data reflects the application of statutory corporate
income tax rates to net income as if the termination of the S Corporation
status of the College and ELP had occurred on January 1, 1995. The effective
derived income tax rates for the year ended December 31, 1995 and for the
three months ended March 31, 1996 were 38.3% and 39.1%, respectively. For
the year ended December 31, 1995, also gives effect to the reduction of
costs and expenses by $6.2 million, which represents compensation payments
to an S Corporation stockholder of the College in respect of 1995 income
taxes on undistributed S Corporation income.

(4) Shares outstanding and per share data have been adjusted to reflect the
number of shares outstanding after the Reorganization and the issuance of
1,548,181 shares of Common Stock in connection with the Offering necessary
to pay the $14.0 million S Corporation Distribution. See "Reorganization"
and Note 3 to the College's Financial Statements.

(5) Reflects student enrollment as of the beginning of the Fall academic quarter
for each year indicated and as of the beginning of the Winter academic
quarter for the three months ended March 31, 1995 and March 31, 1996,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Seasonality."

(6) Reflects (i) the April 1996 distribution of $2.1 million to the S
Corporation stockholders of the College in respect of income taxes on
estimated S Corporation income for the five-month period ending May 31,
1996, (ii) the recognition of a liability for the estimated amount of
previously recognized and undistributed S Corporation income of the College
through March 31, 1996 of $14.0 million to be paid from the proceeds of the
Offering, but without giving effect to the Offering proceeds, and (iii) the
acquisition of the College by the Company, as if those events occurred on
March 31, 1996.

(7) Gives effect to the pro forma adjustments described in note (6) above and
the receipt and application of the estimated net proceeds of the Offering as
described under "Use of Proceeds." The adjustment for net proceeds of the
Offering includes $14.0 million of the $18.5 million S Corporation
Distribution identified in "Use of Proceeds." The $14.0 million S
Corporation Distribution adjustment is based on the estimated amount of
previously recognized and undistributed S Corporation income of the College
through March 31, 1996, while the $18.5 million S Corporation Distribution
also reflects the estimated additional undistributed S Corporation income
accumulated from April 1, 1996 through the termination of S Corporation
status. The estimated $18.5 million amount is subject to adjustment for
actual S Corporation income of the College in the latter period.

6
<PAGE> 8

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the Shares
offered hereby. Certain statements included in this Prospectus concerning the
Company's future financial condition and performance are forward-looking
statements and the factors discussed below could cause actual results and
developments to be materially different from those expressed in or implied by
such statements.

POTENTIAL ADVERSE EFFECTS OF REGULATION

The College is subject to extensive regulation by governmental agencies and
licensing and accrediting bodies. In particular, the Higher Education Act of
1965, as amended (the "HEA"), and the regulations issued thereunder subject to
significant regulatory scrutiny the College and all other higher education
institutions that participate in the various federal student financial aid
programs under Title IV of the HEA ("Title IV Programs"). The HEA mandates
specific regulatory responsibilities for each of the following components of the
higher education regulatory triad: (i) the federal government through the United
States Department of Education (the "Department of Education"); (ii) the
accrediting agencies recognized by the Department of Education; and (iii) state
higher education regulatory bodies.

For the year ended December 31, 1995, the College derived approximately 46%
of its revenues from Title IV Programs. Certain recently enacted statutory and
regulatory provisions impose new requirements on the College, and the Department
of Education has not fully developed administrative interpretations of these
requirements. Therefore, it is not clear how the new requirements will be
applied and interpreted. In addition, changes in, or new interpretations of,
other applicable laws, rules or regulations could have a material adverse effect
on the College's accreditation, authorization to operate in various states,
permissible activities or costs of doing business. The College's failure to
maintain or renew any required regulatory approvals, accreditations or
authorizations would have a material adverse effect on the College. See
"Licensing, Accreditation and Financial Aid Regulation."

Certain significant regulatory factors that could adversely affect the
College are discussed below:

Loss of State Authorization and Accreditation. The College is dependent on
the authorization of the applicable agency of each state where the College is
offering educational programs to allow it to operate and to grant degrees or
diplomas. State authorization and accreditation by an accrediting agency
recognized by the Secretary of Education are also required in order for an
institution to become and remain eligible to participate in Title IV Programs.
The College is subject to extensive regulation by its accrediting agency, Middle
States, and by its state licensing agencies, the District of Columbia Education
Licensure Commission, the Virginia State Council of Higher Education and, when
the College establishes a campus in Maryland, the Maryland Higher Education
Commission. State laws and regulations and accrediting agency standards affect
the College's operations and may limit the ability of the College to introduce
educational programs or to obtain authorization to operate at certain locations
or in certain states. The loss of accreditation would, among other things,
render the College ineligible to participate in Title IV Programs and would have
a material adverse effect on the College. Similarly, the loss of state
authorization by the College or an existing campus, or the failure of the
College or a new campus to obtain state authorization, would, among other
things, render the College ineligible to participate in Title IV Programs for
students in that state or location and would have a material adverse effect on
the College. See "Licensing, Accreditation and Financial Aid Regulation -- State
Licensure" and "-- Accreditation."

Student Loan Defaults; Loss of Eligibility to Participate in Title IV
Programs. Under the HEA, an educational institution may lose its eligibility to
participate in some or all Title IV Programs if defaults on the repayment of
federally guaranteed student loans exceed certain rates. These rates (known as
"cohort default rates") are based on the repayment history of current and former
students on loans provided under certain Title IV Programs. The Department of
Education calculates a cohort default rate for each institution by determining
the rate at which borrowers who become subject to their repayment obligation in
one federal fiscal year default by the end of the following federal fiscal year.
Any institution that has a cohort default rate equal to or exceeding 25% for
three consecutive years is subject to immediate loss of eligibility to
participate in

7
<PAGE> 9

certain Title IV Programs for a period of up to three federal fiscal years. The
College's cohort default rates on federally guaranteed student loans for the
1991, 1992 and 1993 federal fiscal years, the most recent federal fiscal years
for which final information is available, were 14.1%, 10.6% and 16.6%,
respectively. See "Licensing, Accreditation and Financial Aid
Regulation -- Financial Aid Regulation -- Student Loan Defaults."

Failure to Demonstrate Administrative Capability. Department of Education
regulations specify extensive criteria an institution must satisfy to establish
that it has the requisite "administrative capability" to participate in Title IV
Programs. The failure by an institution to satisfy any of the criteria may lead
the Department of Education to determine that the institution lacks the
requisite administrative capability and, therefore, to commence a proceeding to
impose a fine or to limit, suspend or terminate the participation of the
institution in Title IV Programs, or to require additional scrutiny as a
condition of continued participation. A cohort default rate on federally
guaranteed student loans equal to or exceeding 25% in any one of the three most
recent federal fiscal years is a basis for such a determination by the
Department of Education.

Based on an inspection conducted by the Office of Inspector General of the
Department of Education in mid-1992, the Department of Education concluded that
there were serious deficiencies at that time in the College's administration of
federal student financial aid programs. The Department of Education cited late
and unpaid refunds, lack of refund notification, unpaid credit balances, a high
student withdrawal rate, lack of exit counseling documentation, incorrect loan
certifications and missing financial aid transcripts. Because of these
deficiencies, the Department of Education transferred the College from the
"advance" system of payment, under which the Department of Education accepts an
institution's request for funds and transfers the amount requested (subject to
annual audit), to the "reimbursement" system of payment, under which the
institution must disburse funds to eligible students and document their
eligibility for the aid requested before receiving funds from the Department of
Education. The College disputed various of the Department of Education's
findings, but took steps to correct certain institutional weaknesses identified
in the report. Further, following an internal audit, the College in 1993 and
1994 repaid to the government certain Title IV funds for which the College
determined its documentation was inadequate. Following these remedial actions,
the Department of Education returned the College to the advance system of
payment, effective December 7, 1995. The Department of Education could impose
additional sanctions in the future if it determined that the College lacks the
capability to administer federal student financial aid programs. See "Licensing,
Accreditation and Financial Aid Regulation -- Financial Aid
Regulation -- Administrative Capability."

Failure to Demonstrate Financial Responsibility. The HEA and the
regulations issued thereunder impose new standards of financial responsibility
on eligible higher education institutions. These standards require, among other
things, that a proprietary institution such as the College meet an "acid test"
ratio (defined as the ratio of cash, cash equivalents and current accounts
receivable to current liabilities) of at least 1-to-1 at the end of the
institution's most recent fiscal year. For the fiscal year ended December 31,
1995, the College's "acid test" ratio was equal to 1.44-to-1. In addition, an
eligible institution may be required to submit an irrevocable letter of credit,
payable to the Department of Education, in an amount equal to 25% of the total
dollar amount of refunds that the institution paid on Title IV Programs in the
previous fiscal year unless the institution meets certain conditions that
indicate student refunds will be paid. The College has obtained such a letter of
credit in the amount of $500,000. Failure of the College to meet the financial
responsibility standards would, among other things, render the College
ineligible to participate in Title IV Programs and would have a material adverse
effect on the College. See "Licensing, Accreditation and Financial Aid
Regulation -- Financial Aid Regulation -- Financial Responsibility."

Regulatory Consequences of a Change in Ownership Resulting in a Change of
Control. A change in ownership resulting in a change of control of the College,
depending on the type of transaction that gives rise to a change, may have
significant regulatory consequences for the College. Such a change in ownership
could trigger a requirement for recertification by the Department of Education,
reauthorization by certain state licensing agencies or a review of the College's
accreditation by Middle States. Based in part on advisory letters that the
Department of Education, Middle States and certain of the applicable state
authorizing agencies issued in connection with the Offering, the Company does
not believe that the Reorganization or the Offering will constitute a change in
ownership resulting in a change of control under these standards. Nevertheless,

8
<PAGE> 10

upon completion, the Reorganization and the Offering must be reported to the
Department of Education, Middle States and applicable state licensing agencies,
and the reporting could subject the College to further review by any of those
bodies. After the Offering, upon a change of control sufficient to require the
College to file a Form 8-K with the Securities and Exchange Commission, the
College would cease to be eligible to participate in Title IV Programs until
recertified or provisionally certified by the Department of Education. In
addition, the College's accrediting agency, Middle States, requires institutions
that it accredits to inform it and, if required, to obtain its approval, in
advance of any substantive change, including a change that significantly alters
the ownership or control of the institution. The District of Columbia Education
Licensure Commission may require an institution licensed by it to apply to amend
its license prior to a change in ownership. Although the Department of Education
does not treat retirement or death of an owner as a change in ownership
resulting in a change of control if ownership and control are transferred to a
member of the owner's family or to certain members of the institution's
management, District of Columbia, Virginia and Maryland law and Middle States
policies do not specifically address such changes. Consequently, one or more
regulatory entities could require reporting, review or reauthorization upon a
change in ownership resulting from an owner's retirement or death. If the
College undergoes a change in ownership and is not recertified or provisionally
certified by the Department of Education, does not obtain reauthorization from
the necessary state agencies or has its accreditation withdrawn, the change
would have a material adverse effect on the College. See "Licensing,
Accreditation and Financial Aid Regulation -- Change in Ownership Resulting in a
Change of Control."

Other Regulations. In addition to the regulations discussed above, the
College is subject to compliance with numerous other regulatory requirements.
These requirements include additional financial responsibility standards;
compliance with a rule known as the "85/15 Rule" that limits an institution's
dependence on Title IV Program funds; and restrictions on adding new locations
and programs. In addition, the College is prohibited from offering its employees
incentive compensation or other payments or gifts that might constitute
inducements to secure enrollments. Failure of the College to comply with these
regulations would, among other things, render the College ineligible to
participate in Title IV Programs and would have a material adverse effect on the
College. See "Licensing, Accreditation and Financial Aid Regulation -- Financial
Aid Regulation."

LACK OF EXPERIENCE IN OPERATING CAMPUSES IN MARYLAND

The College's business strategy includes the establishment of new campuses
in the State of Maryland pursuant to approval granted in early 1996 by the
Maryland Higher Education Commission. See "Business -- Business Strategy."
Although the College formerly operated a campus in Baltimore, Maryland, oriented
toward secretarial and clerical training, the College closed that campus in
1992, and management has no experience in operating a degree-granting higher
education institution under Maryland state regulatory requirements. There can be
no assurance that the College will be successful in establishing any campuses in
Maryland, or that any campus established in Maryland will be profitable.

COMPETITION

The post-secondary education market in the College's market area is highly
competitive. The College competes with traditional public and private two-year
and four-year colleges, other for-profit schools and alternatives to higher
education, such as employment and military service. Public colleges may offer
programs similar to those of the College at a lower tuition level as a result of
government subsidies, government and foundation grants, tax-deductible
contributions and other financial sources not available to proprietary
institutions. See "Business -- Competition."

DEPENDENCE ON KEY PERSONNEL

The College is highly dependent on certain of its personnel, particularly
Ron K. Bailey, the College's President. The loss of Mr. Bailey's services or
those of one or more of the College's other significant employees could have a
material adverse effect on the College's financial condition and results of
operations. The College believes that its future success will depend upon its
ability to continue to attract, motivate and retain highly

9
<PAGE> 11

skilled, managerial, recruitment and marketing, and academic personnel. The
College does not carry key-man life insurance on its key personnel. There can be
no assurance that the College will continue to be successful in attracting and
retaining the personnel it requires. See "Management."

RISKS RELATING TO SEL PROGRAM

In 1995, Strayer began originating educational loans under the SEL Program
to eligible students as part of its strategy to reduce its administrative
expenses, lessen its dependence on federal student financial aid programs and
attract and retain qualified students. The amounts of these loans originated in
1995 and the three months ended March 31, 1996 were approximately $1.4 million
and $650,000, respectively. See "Business -- SEL Program." The College intends
to expand the SEL Program following completion of the Offering. Strayer will be
exposed to the risk of losses associated with this type of unsecured lending.
The College has operated the SEL Program only for a limited period and for this
reason is unable to evaluate fully its underwriting standards.

ABILITY TO MANAGE GROWTH

The College experienced a period of rapid growth from 1989 to 1992 that
strained the College's financial and management information systems and other
resources. See "Licensing, Accreditation and Financial Aid Regulation -- State
Licensure" and "-- Financial Aid Regulation -- Administrative Capability."
Although the College has made a substantial investment in augmenting these
systems and resources to support future growth, there can be no assurance that
the College will be able to manage any further expansion effectively. Failure to
do so would have a material adverse effect on the College's financial condition,
results of operations and regulatory compliance.

SEASONALITY

The Company's quarterly results of operations tend to vary significantly
within a year because of student enrollment patterns. Enrollment is lower in the
third, or summer, quarter than in the other three quarters. The Company expects
that these seasonal trends will continue. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Seasonality."

CONCENTRATION OF SHARE OWNERSHIP; ANTI-TAKEOVER EFFECT

Ron K. Bailey, jointly with his spouse (the "Current Stockholders"),
currently owns all of the College's outstanding capital stock. See "The
Company." Upon completion of the Offering, the Current Stockholders will
beneficially own approximately 66.7% of the Company's outstanding Common Stock.
As a result, the Current Stockholders will have the ability to elect all of the
Company's directors and to determine the outcome of corporate actions requiring
stockholder approval. These facts may have the effect of delaying or preventing
a change in control of the Company or causing a change in control of the Company
which may not be favored by the Company's other stockholders. The Company will
be authorized to issue up to 5,000,000 shares of Preferred Stock in one or more
series, having terms fixed by the Board of Directors without stockholder vote.
Issuance of these shares could also be used as an anti-takeover device. The
Board of Directors has no current intentions or plans to issue any Preferred
Stock. See "Principal Stockholders" and "Description of Capital Stock." In
addition, a change in ownership resulting in a change of control of the Company
could trigger a requirement for recertification of the College by the Department
of Education, a review of the College's accreditation by Middle States or
reauthorization by certain state licensing agencies. These factors may tend to
discourage attempts to acquire control of the Company from the Current
Stockholders. See "Licensing, Accreditation and Financial Aid
Regulation -- Change in Ownership Resulting in a Change of Control."

BENEFITS OF THE OFFERING TO AFFILIATES

Approximately $19.7 million of the net proceeds of the Offering will be
used to make payments to affiliates of the Company. Of this amount,
approximately $18.5 million (subject to adjustment) will be paid to

10
<PAGE> 12

the Current Stockholders as the S Corporation Distribution and approximately
$1.2 million will be paid to Ron K. Bailey, a Current Stockholder, in connection
with the Company's acquisition from Mr. Bailey of an education loan servicing
company. See "Reorganization," "Use of Proceeds" and "Certain Transactions."

NO PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after the Offering or that the market price of the Common Stock
will not decline below the initial public offering price. The initial public
offering price will be determined by negotiations between the Company and the
Representative of the Underwriters. See "Underwriting" for a discussion of
factors considered in determining the initial public offering price. The trading
price of the Company's Common Stock may be subject to wide fluctuations in
response to quarterly variations in operating results, new regulations or
interpretations of regulations, announcements of new programs and locations by
the Company or its competitors, or other factors. Those factors, as well as
general economic, political and market conditions, may adversely affect the
market price of the Common Stock.

DIVIDEND POLICY

Although the Company intends to establish an initial policy of declaring
cash dividends, there can be no assurances that dividends will be paid. The
payment and rate of future dividends are subject to the discretion of the Board
of Directors and will depend upon the Company's earnings, financial condition,
capital needs and regulatory considerations. See "Dividend Policy."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market after the
Offering could adversely affect the market price of the Common Stock. Upon
completion of the Offering, there will be 9,000,000 shares of Common Stock of
the Company outstanding (excluding 700,000 shares issuable upon exercise of
options held by employees of the Company). Of these shares, all of the 3,000,000
shares of Common Stock sold in the Offering will be freely transferable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), except that any shares purchased by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act, generally
may be resold only in compliance with applicable provisions of Rule 144. The
remaining 6,000,000 shares of Common Stock will be held by the Current
Stockholders and are "restricted securities" as that term is defined in Rule
144. The Company and the Current Stockholders have agreed not to sell or
otherwise dispose of any shares of Common Stock, or any securities convertible
into or exercisable or exchangeable for shares of Common Stock (subject, in the
case of the Company, to an exception for the grant of options under the
Company's stock option plan), for a period of 180 days after the date of this
Prospectus without the consent of the Representative of the Underwriters.
Commencing 90 days after the date of this Prospectus, and subject to such
consent, all but 1,000 of the 6,000,000 shares owned by the Current Stockholders
will be eligible for sale in the public market subject to compliance with the
volume limitations and other restrictions of Rule 144. See "Shares Eligible for
Future Sale."

IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS

Investors in the Offering will experience an immediate and substantial
dilution in net tangible book value of $6.84 per Share and may experience
further dilution upon the exercise of outstanding stock options by certain
executive officers and employees. See "Dilution."

11
<PAGE> 13

THE COMPANY

The College is a regional proprietary institution of higher education
accredited by Middle States that offers business-oriented undergraduate and
graduate degree programs at eight campuses in Washington, D.C. and Northern
Virginia. At the beginning of the 1995 Fall quarter, approximately 7,400 Strayer
students were pursuing studies in accounting, business administration, computer
information systems, economics, marketing and general studies.

The College has provided educational services for over 100 years since it
began operations in Baltimore, Maryland in 1892 with the founding of Strayers
Business College of Baltimore City by Dr. S. Irving Strayer. The College was
incorporated under Maryland law in April 1898. In 1904, Dr. Strayer and his
business partner, Thomas W. Donoho, started a business school in the District of
Columbia. In 1928, the Strayer College of Accountancy was founded and was
licensed to confer associate's and professional degrees by the District of
Columbia Board of Higher Education. The Business College and the College of
Accountancy operated concurrently, in the same building, until 1958, when the
two institutions began to offer instruction as Strayer Junior College of
Finance. Shortly thereafter, the two schools were incorporated as Strayer Junior
College, Inc. The schools principally provided clerical and secretarial training
until 1969, when Strayer was first licensed to grant bachelor's degrees at its
Washington, D.C. campus. Strayer College, Inc. and Strayer Junior College, Inc.
merged in 1973, and the College was accredited in that year as a Senior College
of Business by the Accrediting Commission of the Association of Independent
Colleges and Schools.

The Donoho family transferred ownership of the College in 1980 to Dr.
Charles Palmer. In 1981, the College obtained Middle States accreditation and
received approval from the Virginia State Council of Higher Education to offer
programs at a campus in Arlington, Virginia. The Middle States accreditation did
not extend to the Baltimore campus, which remained a clerical and secretarial
institution. The College was authorized to award master's degrees in 1987, and
opened a campus in Alexandria, Virginia in 1988.

In 1989, Mr. Ron K. Bailey, jointly with his wife, acquired all of the
outstanding capital stock of the College. Under Mr. Bailey's management, Strayer
closed the Baltimore campus and inaugurated a program of significant expansion
in the greater Washington, D.C. area that resulted in the opening of five new
campuses by the end of 1992: Woodbridge in 1989; Manassas in 1990; Loudoun in
1991; and Fredericksburg and Takoma Park in 1992. Student enrollment more than
tripled from approximately 2,150 students at the beginning of the 1989 Fall
quarter to approximately 7,400 students at the beginning of the 1995 Fall
quarter. During the same period, the College focused its attention on its degree
programs by broadening its course offerings, increasing the number of faculty
members with doctoral and other terminal degrees, expanding its library and
other learning resources and investing in information systems.

Upon completion of the Offering, the College will become a wholly-owned
subsidiary of the Company. See "Reorganization -- Formation of Holding Company."

The Company's executive offices are located at 1025 Fifteenth Street, N.W.,
Washington, D.C. 20005. Its telephone number is (202) 408-2400.

REORGANIZATION

In connection with the Offering, the Company and the College will take
certain corporate actions described below, which are collectively referred to in
this Prospectus as the "Reorganization."

FORMATION OF HOLDING COMPANY

Prior to the Reorganization, the Company's business was conducted through
the College. In anticipation of the Offering, the Company was incorporated in
Maryland on May 10, 1996, and on May 15, 1996, the Company issued 1,000 shares
of Common Stock to Mr. and Mrs. Ron K. Bailey, the Current Stockholders of the
College. Upon completion of the Offering, the Company will acquire 100% of the
outstanding capital stock of the College from the Current Stockholders in
exchange for 5,999,000 shares of Common Stock. Thereafter, the College will be
operated as a wholly-owned subsidiary of the Company.

12
<PAGE> 14

TERMINATION OF S CORPORATION STATUS

The College has elected to be treated for federal income and certain state
tax purposes as an S Corporation under Subchapter S of the Internal Revenue Code
of 1986 and comparable state laws. As a result, earnings of the College for
prior tax years have been included in the taxable income of its stockholders,
and the College has not been subject to income tax on those earnings for federal
and most state tax purposes.

The College has made regular payments to Ron K. Bailey, a Current
Stockholder, in respect of the expected tax liabilities of the Current
Stockholders for income earned by the College that was treated as having been
earned by the Current Stockholders. These amounts were treated as compensation
and are reflected as general and administration expense in the College's
Financial Statements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Background and Overview." In April 1996,
the College made a distribution in the amount of $2.1 million to the Current
Stockholders, which represents the Current Stockholders' estimated tax liability
for S Corporation income expected to be earned during the five-month period
ending May 31, 1996.

Prior to completion of the Offering, the College's S Corporation status
will terminate. Termination of S Corporation status will subject the College to
federal and state income taxes with respect to income earned after the
termination date.

In connection with termination of its S Corporation status, the College
will declare to the Current Stockholders a dividend (the "S Corporation
Distribution"), which will be paid out of the net proceeds of the Offering. See
"Use of Proceeds." The S Corporation Distribution, in the amount of
approximately $18.5 million, will be equal to the amount of the previously
recognized and undistributed S Corporation income on which the Current
Stockholders have paid, or will pay, income tax. The estimated $18.5 million
amount is subject to adjustment for actual S Corporation income during the
period prior to termination of S Corporation status. Purchasers of Shares in the
Offering will not be entitled to the S Corporation Distribution. Following
completion of the Reorganization, the Company and its subsidiaries will be
subject to corporate income taxation on a consolidated basis. See Note 3 to the
College's Financial Statements.

ACQUISITION OF ELP

Beginning in 1995, educational loans under the SEL Program have been
purchased from the College and serviced by an affiliated company, Education Loan
Processing, Inc. ("ELP"). Ron K. Bailey, President and a Director of the Company
and the founder of ELP, has been ELP's sole stockholder. Upon completion of the
Offering, the Company will purchase from Mr. Bailey for cash all of the capital
stock of ELP, which will become a wholly-owned subsidiary of the Company. The
purchase price for the ELP capital stock will be equal to the net book value of
ELP on the date of acquisition. As of March 31, 1996, ELP's net book value was
$1.2 million. The purchase price will be paid out of the net proceeds of the
Offering. The Company also intends to apply a portion of the net proceeds of the
Offering to fund ELP's operations. See "Use of Proceeds." Prior to the Offering,
ELP has elected to be treated as an S Corporation for federal income and certain
state tax purposes. In connection with the Reorganization, ELP's S Corporation
status will terminate and ELP will become subject to federal and state income
taxes with respect to income earned after the termination date.

13
<PAGE> 15

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Shares offered hereby,
after deducting the underwriting discount and estimated Offering expenses
payable by the Company, are expected to be approximately $27.2 million
(approximately $31.4 million if the Underwriters' over-allotment option is
exercised in full).

Net proceeds of the Offering of approximately $19.7 million will be applied
to make payments to affiliates of the Company. Of this amount, approximately
$18.5 million (subject to adjustment) will be used to fund the S Corporation
Distribution to the Current Stockholders and approximately $1.2 million will be
paid to Ron K. Bailey, President of the Company, in connection with the
Company's acquisition of ELP. See "Reorganization -- Termination of S
Corporation Status" and "-- Acquisition of ELP."

Of the remaining net proceeds of approximately $7.5 million, approximately
$3.5 million will be used to fund ELP operations, up to approximately $3.0
million will be used for the possible acquisition of one or more campus
facilities from unaffiliated parties and the balance, if any, will be used for
other corporate purposes. See "Business -- Business Strategy" and "Certain
Transactions -- Transactions with ELP." As of the date of this Prospectus, the
College has not exercised its purchase option under any lease for the
acquisition of a campus facility.

Pending their application, the net proceeds of the Offering will be
invested in short-term, investment-grade, interest-bearing securities.

14
<PAGE> 16

CAPITALIZATION

The following table sets forth, as of March 31, 1996, (i) the actual
capitalization of the College, (ii) the pro forma capitalization of the Company
after giving effect to the acquisition of the College by the Company, the
distribution of $2.1 million to the Current Stockholders in April 1996 in
respect of income taxes on estimated S Corporation income for the five-month
period ending May 31, 1996 and the recognition of a current liability for the
estimated S Corporation Distribution of $14.0 million (subject to adjustment) to
be paid from the proceeds of the Offering and (iii) the capitalization of the
Company as adjusted to give effect to the receipt of the net proceeds of the
Offering, the payment of the S Corporation Distribution and the acquisition of
ELP. See "Reorganization" and "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------
<S> <C> <C> <C>
(UNAUDITED)

<CAPTION>
PRO AS
ACTUAL FORMA ADJUSTED(1)
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Distribution payable to stockholders........................... $ -- $14,042 $ --
Long-term debt................................................. -- -- --
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares
authorized; no shares issued or outstanding............. -- -- --
Common Stock:
$10 par value, 500 shares authorized; 375.5 shares
issued and outstanding............................. 4 -- --
$.01 par value, 20,000,000 shares authorized;
6,000,000 and 9,000,000 shares issued and
outstanding, respectively.......................... -- 60 90
Additional paid-in capital................................ 1,142 1,142 27,112
Retained earnings......................................... 17,163 966 966
Net unrealized gains on investments....................... 255 255 255
------- ------- -----------
Total stockholders' equity........................... $18,564 $ 2,423 $28,423
======= ======= =========
Total capitalization................................. $18,564 $16,465 $28,423
======= ======= =========
</TABLE>

- ---------------
(1) The adjustment for the S Corporation Distribution is $14.0 million based on
the estimated amount of previously recognized and undistributed S
Corporation income of the College through March 31, 1996. The S Corporation
Distribution of $18.5 million identified in "Use of Proceeds" reflects the
estimated additional undistributed S Corporation income accumulated from
April 1, 1996 through the termination of S Corporation status. The
estimated $18.5 million amount is subject to adjustment for actual S
Corporation income of the College in the latter period.

DIVIDEND POLICY

After the Offering, the Company intends to establish an initial policy of
declaring quarterly cash dividends at the rate of $0.0625 per share ($0.25
annually) on the Company's Common Stock. The amount of dividends payable in the
future will be reviewed periodically by the Company's Board of Directors in
light of the Company's earnings, financial condition, capital needs and
regulatory considerations. There is no requirement or assurance that dividends
will be paid.

The College made distributions to the Current Stockholders of $2.8 million
in 1994, $3.4 million in 1995 and $650,000 in the three months ended March 31,
1996 for application by the Current Stockholders to the acquisition of campus
facilities leased to the College and to the establishment and funding of ELP.
See "Certain Transactions -- Lease of Campus Facilities" and "-- Transactions
with ELP."

15
<PAGE> 17

DILUTION

The pro forma net tangible book value of the Company's Common Stock at
March 31, 1996 was approximately $2.4 million or $.40 per share. Net pro forma
tangible book value represents the amount of the Company's net tangible assets
less total liabilities, adjusted to give effect to (i) the formation of the
Company, (ii) the acquisition of the College by the Company, (iii) the
distribution of $2.1 million to the Current Stockholders in April 1996 in
respect of income taxes on estimated S Corporation income of the College for the
five-month period ending May 31, 1996 and (iv) the recognition of a current
liability for the estimated S Corporation Distribution of $14.0 million (subject
to adjustment) to be paid from the proceeds of the Offering divided by the pro
forma total number of shares of Common Stock outstanding. After giving effect to
the Offering (after deducting the underwriting discount and estimated Offering
expenses payable by the Company) and the application of the estimated net
proceeds therefrom as described under "Use of Proceeds," the adjusted pro forma
net tangible book value of the Company at March 31, 1996 would have been
approximately $28.4 million or $3.16 per share. This represents an immediate
increase in net tangible book value of $2.76 per share to existing stockholders
and an immediate dilution of $6.84 per share to the persons purchasing Shares in
the Offering ("New Investors"). The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $10.00
Pro forma net tangible book value per share at
March 31, 1996........................................ $ .40
Increase per share attributable to New Investors........ 2.76
-----
Adjusted pro forma net tangible book value per share after
the Offering(1)............................................ 3.16
------
Dilution per share to New Investors.......................... $ 6.84
======
</TABLE>

- ---------------
(1) The adjustment for net proceeds of the Offering includes $14.0 million of
the $18.5 million S Corporation Distribution identified in "Use of
Proceeds." The $14.0 million S Corporation Distribution adjustment is based
on the estimated amount of previously recognized and undistributed S
Corporation income of the College through March 31, 1996, while the $18.5
million S Corporation Distribution also reflects the estimated additional
undistributed S Corporation income accumulated from April 1, 1996 through
the termination of S Corporation status. The estimated $18.5 million amount
is subject to adjustment for actual S Corporation income of the College in
the latter period.

The following table summarizes, on a pro forma basis, at March 31, 1996,
the differences between existing stockholders and the New Investors with respect
to the number of shares purchased from the Company, the total consideration paid
and the average price per share paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 6,000,000 66.67% $ 3,801,000(1) 11.25% $ 0.63
New Investors.......................... 3,000,000 33.33 30,000,000 88.75 $ 10.00
--------- ------- ----------- -------
Total............................. 9,000,000 100.00% $33,801,000 100.00%
======== ====== ========== ======
</TABLE>

- ---------------
(1) Reflects amount paid by the Current Stockholders in May 1996 for 1,000
shares and amount paid by the Current Stockholders in 1989 for the
College's capital stock, which will be exchanged for 5,999,000 Shares upon
completion of the Offering. See "Reorganization -- Formation of Holding
Company."

16
<PAGE> 18

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA AMOUNTS)

The following table sets forth, for the periods and at the dates indicated,
financial data for the College. The financial information as of December 31,
1993, 1994 and 1995 and for each of the years then ended has been derived from
the College's Financial Statements, which statements have been audited by
Coopers & Lybrand L.L.P., independent public accountants. The financial
information as of December 31, 1991 and 1992 and for the years then ended has
been derived from the College's Financial Statements, which statements have been
audited by other independent public accountants. The information set forth below
is qualified by reference to and should be read in conjunction with the
College's Financial Statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Prospectus. The unaudited selected combined financial
information as of March 31, 1995 and 1996 and for each of the three-month
periods then ended has been derived from the unaudited combined financial
statements of the College for each respective period presented and, in the
opinion of management, reflects all adjustments, consisting only of normal
adjustments, necessary for a fair presentation of the results of operations for
these periods. The results of operations of the College for the three months
ended March 31, 1996 are not necessarily indicative of the results to be
expected for the full year. The combined pro forma financial data does not
purport to represent what the College's financial position or results of
operations would actually have been had these events in fact occurred on the
date or at the beginning of the periods indicated or to project the Company's
financial position or results of operations for any future date or period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
YEAR ENDED DECEMBER 31, -----------------------------------
-------------------------------------------------------------
PRO (UNAUDITED)
FORMA PRO
1995(3) FORMA
1991 1992 1993 1994 1995 ----------- 1995 1996 1996(3)
------- ------- ------- ------- ------- (UNAUDITED) ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues
Tuition................. $16,008 $22,961 $28,545 $33,238 $36,934 $36,934 $ 9,989 $ 11,570 $11,570
Fees and other.......... 521 832 823 1,019 1,262 1,262 646 845 845
------- ------- ------- ------- ------- ----------- ----------- ----------- -------
16,529 23,793 29,368 34,257 38,196 38,196 10,635 12,415 12,415
------- ------- ------- ------- ------- ----------- ----------- ----------- -------
Costs and expenses
Instruction and
education support..... 7,399 9,262 14,185 14,740 16,168 16,168 4,042 4,577 4,577
Selling and promotion... 2,023 2,758 3,092 3,667 4,281 4,281 836 974 974
General and
administration(1)..... 5,027 9,278 7,847 10,648 11,522 5,347 2,810 2,205 2,205
Provision for student
loan losses........... -- -- -- -- 49 49 3 31 31
------- ------- ------- ------- ------- ----------- ----------- ----------- -------
14,449 21,298 25,124 29,055 32,020 25,845 7,691 7,787 7,787
------- ------- ------- ------- ------- ----------- ----------- ----------- -------
Income from
operations............ 2,080 2,495 4,244 5,202 6,176 12,351 2,944 4,628 4,628
Investment and other
income................ 186 184 180 350 875 875 148 108 108
------- ------- ------- ------- ------- ----------- ----------- ----------- -------
Net income(2)........... $ 2,266 $ 2,679 $ 4,424 $ 5,552 $ 7,051 $13,266 $ 3,092 $ 4,736 $ 4,736
======= ======= ======= ======= ======= ========= ======= ======= =======
PRO FORMA DATA:(3)
Pro forma income taxes.... $ 5,069 $ 1,852
Pro forma net income...... $ 8,157 $ 2,884
Pro forma net income per
share(4)................ $ 1.08 $ .38
Pro forma weighted average
shares outstanding(4)... 7,548 7,548
OPERATING DATA:
Enrollment(5)............. 4,000 5,600 6,200 6,800 7,400 6,500 7,100
Number of campuses........ 6 8 8 8 8 8 8
</TABLE>

(footnotes on following page)

17
<PAGE> 19

(footnotes from previous page)
- ---------------
(1) Includes bonus payments to an S Corporation stockholder of the College of
$0.2 million in 1991, $0.9 million in 1992, $3.5 million in 1993, $5.5
million in 1994, $6.2 million in 1995 and $1.6 million in the three months
ended March 31, 1995 for the payment of income taxes by the S Corporation
stockholders on undistributed S Corporation income. No such bonus payments
were made during the three-month period ended March 31, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Background and Overview" and Note 3 to the College's Financial
Statements.

(6) Reflects (i) the April 1996 distribution of $2.1 million to the S
Corporation stockholders in respect of income taxes on estimated S
Corporation income for the five-month period ending May 31, 1996, (ii) the
recognition of a liability for the estimated amount of previously recognized
and undistributed S Corporation income of the College through March 31, 1996
of $14.0 million to be paid from the proceeds of the Offering, but without
giving effect to the Offering proceeds, and (iii) the acquisition of the
College by the Company, as if those events occurred on March 31, 1996.

18
<PAGE> 20

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BACKGROUND AND OVERVIEW

The College is a regional proprietary institution of higher education
offering undergraduate and graduate degree programs at eight campuses in the
greater Washington, D.C. area. Strayer Education, Inc., a Maryland corporation,
was incorporated in May 1996 to acquire all of the outstanding capital stock of
the College from Mr. and Mrs. Ron K. Bailey, the Current Stockholders of the
College. Upon completion of the Offering, Strayer Education, Inc. also will
acquire all of the outstanding capital stock of ELP, which services loans under
the SEL Program. Upon completion of the Offering, the College and ELP will each
be direct subsidiaries of Strayer Education, Inc. See "Reorganization."

Revenues, operating income and net income have increased in each of the
last three years. From 1993 through 1995, revenues increased 30.0%, operating
income increased 45.5% and net income increased 59.4%. Over the three-year
period, tuition revenue accounted for approximately 97.0% of total revenue. The
number of students increased 19.3% from approximately 6,200 at the beginning of
the 1993 Fall quarter to approximately 7,400 at the beginning of the 1995 Fall
quarter. Tuition rates increased approximately 15% over the three years. During
the three-year period, the College relocated three campuses to larger
facilities, expanded information technology course offerings, added more
week-end classes and increased its marketing programs. The opening of five new
campuses from 1989 to 1992 contributed to enrollment growth during the 1993-95
period, since enrollment growth rates at a campus historically have been the
greatest in the early years following commencement of operations at the campus.
In 1995, the College added personnel in the areas of human resources, facilities
management and administration to support its plans for expansion. The costs of
these additional personnel are reflected in general and administrative expense.

The College's principal source of revenue is tuition collected from its
students. The academic year of the College is divided into four quarters which
approximately coincide with the four quarters of the calendar year. Students
generally must pay the entire tuition for each course prior to the beginning of
the quarter. If a student withdraws from a course prior to completion, the
College refunds a portion of the tuition which reflects the percentage of the
course completed. When students register for courses, tuition is recorded as
deferred revenues, which are recognized as courses are taught through the
academic quarter. Revenues also consist in part of fees and other revenues
derived principally from application fees, "no show" fees and bookstore sales.
When a student registers for a course but does not attend any classes, which can
have the effect of denying a place in the course to another student, the College
imposes a "no show" fee. Student enrollment information presented herein
reflects enrollment as of the beginning of the Fall academic quarter for the
applicable year and as of the beginning of the Winter academic quarter for the
applicable interim period.

The College records tuition receivable when students register for the
academic quarter, generally prior to the end of the previous academic quarter.
Because the College's academic quarters coincide with the calendar quarter,
tuition receivable at the end of any calendar quarter largely represents student
tuition for the following academic quarter which is included in current
liabilities as deferred tuition revenue. Based upon past experience and
judgment, the College establishes an allowance for doubtful accounts with
respect to accounts receivable not included in deferred tuition revenue. Any
uncollected account more than six months past due is charged against the
allowance. The College's historical bad debt expense as a percentage of revenue
for the years ended December 31, 1993, 1994 and 1995 was 2.9%, 1.9% and 1.7%,
respectively, and for the three months ended March 31, 1996 was 0.8%.

The College's expenses consist of instruction and educational support
expense, selling and promotion expense and general and administration expense.
Instruction and educational support expense generally contains items of expense
directly attributable to the educational activity of the College. This expense
category includes salaries and benefits of faculty, academic administrators, and
student support personnel, including financial aid officers, registrars and
career counselors. Instruction and educational support expense also includes
costs of educational supplies and facilities, including rents on campus leases,
certain costs of

19
<PAGE> 21

establishing and maintaining computer laboratories and all other physical plant
and occupancy costs with the exception of costs attributable to one floor of the
Arlington campus used for administrative purposes.

Selling and promotion expense includes salaries and benefits of personnel
engaged in recruitment, admissions, promotion and development, as well as costs
of advertising and production of marketing materials.

General and administration expense includes salaries and benefits of
personnel engaged in accounting, personnel, compliance and other business
functions and plant and occupancy costs attributable to such functions. Further,
as discussed below, general and administration expense before 1996 reflected
payments made to Ron K. Bailey for taxes payable by the Current Stockholders in
respect of the College's income.

Prior to 1996, the College each year paid to Ron K. Bailey amounts
sufficient to pay the income tax liabilities of the Current Stockholders for
income earned by the College as a corporation electing under Subchapter S of the
Internal Revenue Code of 1986. These amounts were paid as bonuses (subject to
payroll taxes and benefits) and were reflected in general and administration
expense. The bonus payments totaled $3.5 million, $5.5 million, $6.2 million and
$1.6 million in 1993, 1994, 1995 and the three months ended March 31, 1995,
respectively. Beginning January 1, 1996, amounts previously paid to Mr. Bailey
for taxes payable in respect of the College's income are being paid to Mr. and
Mrs. Bailey as distributions to stockholders and not to Mr. Bailey as a bonus.
Unlike bonuses, such distributions are not reflected as general and
administrative expense. The College will continue to make distributions to
stockholders for taxes payable in respect of the College's income until the
College's S Corporation status terminates prior to completion of the Offering.
Following such termination, the Company and its subsidiaries will be subject to
corporate income taxation on a consolidated basis.

Investment and other income consists principally of earnings on
investments.

Historically, inflation has not had a significant effect on the results of
operations of the College or ELP.

RESULTS OF OPERATIONS

The following table sets forth certain combined income statement data as a
percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH
DECEMBER 31, 31,
----------------------- --------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Tuition............................................ 97.2% 97.0% 96.7% 93.9% 93.2%
Fees and other..................................... 2.8 3.0 3.3 6.1 6.8
----- ----- ----- ----- -----
100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Instruction and educational support................ 48.3 43.0 42.3 38.0 36.9
Selling and promotion.............................. 10.5 10.7 11.2 7.9 7.8
General and administration......................... 26.7 31.1 30.2 26.4 17.8
Provision for student loan losses.................. .0 .0 .1 .0 .2
----- ----- ----- ----- -----
Income from operations.................................. 14.5 15.2 16.2 27.7 37.3
Investment and other income............................. .6 1.0 2.3 1.4 .9
----- ----- ----- ----- -----
Net income.............................................. 15.1% 16.2% 18.5% 29.1% 38.1%
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

Revenues. Tuition revenue increased 15.8% from $10.0 million in the first
quarter of 1995 to $11.6 million in the first quarter of 1996, due to a 10.0%
increase in the number of students and a 7.0% tuition increase effective for
1996. Fees and other revenue increased 30.8% from $.6 million in the first
quarter of

20
<PAGE> 22

1995 to $.8 million in the first quarter of 1996, principally as a result of the
increase in the number of students in the 1996 quarter.

Instruction and educational support expense. Instruction and educational
support expense increased 13.2% from $4.0 million in the first quarter of 1995
to $4.6 million in the first quarter of 1996. The increase was primarily
attributable to an increase in library costs associated with a new computer
system providing students with access to substantially more resource materials,
increased financial aid costs due to the engagement of an outside contractor to
manage the student loan default rate and improve financial aid administration
and increased physical plant and occupancy costs resulting from the relocation
of the Woodbridge campus to a new and larger facility with a higher lease rate.

Selling and promotion expense. Selling and promotion expense increased
16.5% from $.8 million in the first quarter of 1995 to $1.0 million in the first
quarter of 1996, due to increased advertising costs, particularly for television
advertising.

General and administration expense. General and administration expense
decreased 21.5% from $2.8 million in the first quarter of 1995 to $2.2 million
in the first quarter of 1996, due principally to the elimination of bonuses
payable to Ron K. Bailey, as discussed above. Excluding the bonus of $1.6
million paid to Mr. Bailey in the first quarter of 1995, general and
administration expense would have increased 82.4% from $1.2 million in the
earlier period to $2.2 million in the later period. The increase primarily
reflected costs of the addition of personnel in the areas of human resources,
facilities management and administration and the effects of a 7.0% pay increase
implemented in the fourth quarter of 1995.

Income from operations. Income from operations increased 57.2% from $2.9
million in the first quarter of 1995 to $4.6 million in the first quarter of
1996. Excluding the bonus of $1.6 million paid to Mr. Bailey in the first
quarter of 1995, income from operations would have been unchanged.

Net income. Net income increased 53.2% from $3.1 million in the first
quarter of 1995 to $4.7 million in the first quarter of 1996. Excluding the
bonus of $1.6 million paid to Mr. Bailey in the first quarter of 1995, net
income would have been unchanged.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Revenues. Tuition revenue increased 11.1% from $33.2 million in 1994 to
$36.9 million in 1995, due to a 8.8% increase in the number of students in 1995
and a 7.1% tuition increase effective for 1995. Average course credits per
student were lower in 1995 than in 1994. Fees and other revenue increased 23.8%
from $1.0 million in 1994 to $1.3 million in 1995, primarily as a result of the
enrollment growth, an increase in "no show" fees, which the College first
imposed in 1994, and interest income on student loans.

Instruction and educational support expense. Instruction and educational
support expense increased 9.7% from $14.7 million in 1994 to $16.2 million in
1995. Salaries and benefits for instructional personnel in all of the College's
educational programs were higher as a result of salary increases, the addition
of personnel to support increased enrollments and the hiring of full-time
managers for the computer laboratory at each campus. Physical plant and
occupancy costs also increased substantially in 1995 because of the relocation
of the Manassas and Woodbridge campuses to new and larger facilities with higher
lease rates. Partially offsetting those increases were reduced expenditures for
student financial aid in 1995.

Selling and promotion expense. Selling and promotion expense increased
16.7% from $3.7 million in 1994 to $4.3 million in 1995, due principally to
increased advertising costs, particularly for television advertising.

General and administration expense. General and administration expense
increased 8.2% from $10.6 million in 1994 to $11.5 million in 1995, due
principally to an increase in the bonus paid to Ron K. Bailey. Excluding the
bonuses in both years, general and administrative expense would have increased
4.4% from $5.2 million in 1994 to $5.4 million in 1995. The increase was
primarily attributable to higher personnel costs incurred by the addition of new
administrative staff to support expansion of the College's on-site programs and
graduate enrollment. The effect of the increase was partially offset by lower
financing costs

21
<PAGE> 23

resulting from the College's return in 1995 to full access to Title IV Programs.
In 1993 and 1994, regulatory action prevented the College from making full use
of Title IV student financial aid for its students. In order to make loans
available on terms comparable to federally guaranteed student loans, the College
contracted with a private company, which purchased institutional loans to
students at a substantial discount from their face value. The discount was
recorded as a cost of financing reflected in general and administrative expense.
In 1995, there was no comparable cost of financing expense.

Income from operations. Income from operations increased 18.7% from $5.2
million in 1994 to $6.2 million in 1995 because of the factors discussed above.

Net income. Net income increased 27.0% from $5.6 million in 1994 to $7.1
million in 1995 because of the factors discussed above.

YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Revenues. Tuition revenue increased 16.4% from $28.5 million in 1993 to
$33.2 million in 1994, due to a 9.7% increase in the number of students in 1994
and a 7.7% tuition increase effective for that year. Fees and other revenue
increased 23.8% from $.8 million in 1993 to $1.0 million in 1994, principally as
a result of the enrollment growth in 1994.

Instruction and educational support expense. Instruction and educational
support expense increased 3.9% from $14.2 million in 1993 to $14.7 million in
1994. Salaries and benefits for instructional personnel were higher in all of
the College's educational programs other than computer information systems. A
6.0% salary increase for all personnel was effective in 1994. Library costs were
also higher, due to the addition of personnel, books and equipment to support
expansion of learning resources centers at all campuses. Financial aid and
placement costs increased as the College engaged an outside firm to augment
regulatory compliance and improve the financial aid system. The effect of these
increases was partially offset by a substantial reduction in physical plant and
occupancy costs as a result of the expiration of two leases on premises
previously occupied by the College in Huntington, Virginia.

Selling and promotion expense. Selling and promotion expense increased
18.6% from $3.1 million in 1993 to $3.7 million in 1994, due principally to
increased advertising and marketing. The College increased its newspaper and
magazine advertising by approximately 50% in 1994, radio advertising by
approximately 40%, and television advertising by approximately 25%. The College
also hired an additional full-time marketing employee in 1994.

General and administration expense. General and administration expense
increased 35.7% from $7.8 million in 1993 to $10.6 million in 1994, principally
because of a substantial increase in the bonus paid to Ron K. Bailey. Excluding
the bonuses in both years, general and administrative expense would have
increased 18.4% from $4.5 million in 1993 to $5.2 million in 1994. This increase
was primarily attributable to a 6.0% salary increase for all administrative
personnel, an increase in the payment of outside consulting fees and an increase
in the number of administrative personnel.

Income from operations. Income from operations increased 22.6% from $4.2
million in 1993 to $5.2 million in 1994 because of the factors discussed above.

Net income. Net income increased 25.5% from $4.4 million in 1993 to $5.6
million in 1994 because of the factors discussed above.

SEASONALITY

The Company's quarterly results of operations tend to vary significantly
within a year because of student enrollment patterns. Enrollment is lower in the
third, or summer, quarter than in the other three quarters. In 1995, enrollments
at the beginning of the Winter, Spring, Summer and Fall academic quarters were
6,475, 6,510, 4,775 and 7,455, respectively. Costs are generally not affected by
the seasonal factors and do not vary significantly on a quarterly basis. To some
extent, however, instructional and educational support expense is lower in the
third quarter because fewer part-time faculty are needed.

22
<PAGE> 24

The following table sets forth the Companies' revenues on a quarterly basis
for the years ended December 31, 1993, 1994 and 1995 and for the three months
ended March 31, 1996:

QUARTERLY REVENUE
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995 1996
----------------- ----------------- ----------------- -------
THREE MONTHS ENDED AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT
- ------------------------------------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
March 31............................ $ 8,822 30% $ 9,169 26% $10,635 28% $12,415
June 30............................. 7,663 26 8,427 25 9,690 25
September 30........................ 5,607 19 7,501 22 7,203 19
December 31......................... 7,276 25 9,160 27 10,667 28
------- ------- ------- ------- ------- -------
Total for Year............ $29,368 100% $34,257 100% $38,196 100%
======= ===== ======= ===== ======= =====
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Since its acquisition by Ron K. Bailey in 1989, the College has financed
its activities through cash generated from operations. Cash generated from the
combined operations, after payment of bonuses to Mr. Bailey, was $1.3 million in
1993, $9.1 million in 1994 and $7.5 million in 1995. Cash generated from
operations has been sufficient to fund purchases of property and equipment and
to make distributions to the Current Stockholders for application by them to the
acquisition of campus facilities leased to the College and to the establishment
and funding of ELP. See "Certain Transactions -- Lease of Campus Facilities" and
"-- Transactions with ELP."

The Company expects to realize net proceeds from the Offering, after
deducting the underwriting discount and estimated Offering expenses payable by
the Company, of approximately $27.2 million. At March 31, 1996, the College had
available cash, cash equivalents and marketable securities of $16.1 million.
Upon completion of the Offering, the Company will pay approximately $18.5
million (subject to adjustment) to the Current Stockholders to fund the S
Corporation Distribution and approximately $1.2 million to Ron K. Bailey in
connection with the Company's acquisition of ELP. See "Use of Proceeds."
Accordingly, upon completion of the Offering and the foregoing application of
net Offering proceeds, the Company expects to have available cash, cash
equivalents and marketable securities of $23.6 million. The Company believes
that this amount, together with cash generated from operations, will be
sufficient to meet its anticipated operating cash requirements, including the
funding of student loans, for at least the next 24 months. If the College
determines to acquire a campus facility, it may finance the acquisition with
indebtedness.

23
<PAGE> 25

BUSINESS

OVERVIEW

Strayer is a regional proprietary institution of higher education offering
undergraduate and graduate degree programs to more than 7,000 students at eight
campuses in Washington, D.C. and Northern Virginia. The College is accredited by
Middle States, the regional institutional accrediting body recognized by the
U.S. Department of Education. The majority of Strayer students are working
adults pursuing their first college degree to improve their job skills and
advance their careers. Of students enrolled in Strayer programs at the beginning
of the 1995 Fall quarter, approximately 57% were over the age of 30 and
approximately 62% were engaged in a part-time course of study. The College
considers a full-time student to be one who completes 13.5 course credits in an
academic quarter or who is enrolled in a master's degree program. In the 1995
Fall quarter, Strayer students completed an average of 9.3 course credits.

Since 1989, when the College came under its current ownership and
management, Strayer has evolved from a small traditional business school into a
regional college that seeks to meet the special needs of the area's working
adult students. The College targets those students that did not go to college
immediately after high school or otherwise did not obtain a degree, but who
later seek additional education primarily for enhanced career opportunities.
Strayer recognizes that a return to school may create special difficulties for
these students, some of whom may have been dissatisfied with their secondary
education and who must balance educational goals with personal and professional
responsibilities. The College emphasizes the following factors to address the
needs of working adult students:

- Convenient Locations. Multiple campus locations provide students with
convenient access to the College throughout the greater Washington, D.C.
area. In early 1996, the College received approval to operate its first
degree-granting campus in the State of Maryland, where approximately 20%
of the College's current enrollment resides. The College also conducts
classes on-site at the Department of Transportation and at the General
Services Administration, for employees of the federal government; at
Quantico Marine Base, Fort Belvoir Army Education Center and Naval Surface
Warfare Center, Dahlgren Division, for active military personnel; and at
Computer Sciences Corporation, in Falls Church, Virginia, for company
employees. The College has submitted a proposal to offer upper level
undergraduate courses at the Southern Maryland Higher Education Center in
California, Maryland.

- Flexible Scheduling. The College's eight campuses offer classes seven
days a week, with some classes beginning as early as 6:00 a.m. and others
lasting as late as midnight. This flexible scheduling allows students to
attend classes at the most convenient times, giving them a better chance
to complete their programs. The College operates on the quarter system,
which allows students to begin their program in any quarter and permits
part-time students to complete their programs in less time than at a
traditional higher education institution.

- Supportive Learning Environment. The College believes that interaction
between teacher and student is important to student success. Accordingly,
Strayer limits the size of its classes and focuses the efforts of its
faculty on teaching, rather than on research or publishing. All full-time
Strayer faculty members maintain convenient office hours to encourage
students to seek additional help. The College provides tuition
reimbursement for faculty members seeking to update their skills and
knowledge.

- Market Responsiveness. The College upgrades and expands its
business-oriented curriculum quickly in response to the changing needs of
students and employers. Strayer's Curriculum Advisory Board includes
representatives of over 20 employers, a majority of whom are from the
private sector, and meets regularly to review and recommend curriculum
changes to the College. Through its relationships with these and other
employers, the College regularly monitors the needs of the market.
Centralized decision-making permits the College to implement curriculum
changes rapidly.

- SEL Program. Loans under the SEL Program provide students with an
alternative to government-sponsored financial aid. The SEL Program enables
students to finance their education through monthly payments of principal
and interest while they attend college and after they graduate and at
interest

24
<PAGE> 26

rates competitive with federal student loan programs. The SEL Program also
contributes to lower administrative costs and enables the College to
reduce its dependence on federal student loan funds.

- Capital Availability. Strayer students do not require the capital
intensive amenities, such as dormitories, leisure and sports facilities
and other plant assets, provided by educational institutions serving a
younger, full-time student population. Instead, the College is able to
invest its resources in its classroom facilities and instructional
programs. By gaining access to the equity capital markets, the College
will have an additional source of funds unavailable to public and
not-for-profit institutions.

BUSINESS STRATEGY

The College seeks to strengthen its position as a leading provider of
business-oriented education for working adults in its market area. To accomplish
this objective, the College employs the following strategies:

- Establish Additional Campuses. Strayer intends to increase enrollment at
its existing campuses and selectively add new campuses in its current
market and contiguous areas. The College plans to begin offering classes
in early 1997 at its first degree-granting campus in Maryland, which will
be located in Prince George's County. The College believes that additional
Strayer campuses in Maryland will help meet an existing demand from
Maryland residents and employers for business-oriented programs.

- Expand and Upgrade Curriculum. The College continually considers new
course offerings, in existing programs and in new programs, and course
upgrades in response to the changing demands of business, industry and
government.

- Expand SEL Program. The College intends to expand the SEL Program to
give students greater flexibility in financing their education and to
reduce its dependence on federal student loan funds. The Company expects
to use a portion of the proceeds from the Offering to purchase and fund
ELP, an education loan servicing company that serves the SEL Program.

- Control Campus Facilities. The College may seek to control its campus
facilities through purchase, as well as through long-term lease.
Management believes that permanent campus locations foster institutional
stability and market presence and enhance the College's ability to develop
and implement financial plans. The College may use a portion of the
proceeds from the Offering to purchase one or more of its existing campus
facilities.

- Expand Distance Education Programs. The College seeks to offer courses
through the Internet, subject to regulatory approval, to give students
greater flexibility in completing their programs. The College initiated
graduate course offerings through the Internet during the 1996 Winter
quarter and offered three graduate courses on-line during the 1996 Spring
quarter. The availability of Strayer course offerings on-line may allow
the College in the future to expand its student population beyond those
geographical areas served by Strayer campuses.

CAMPUS ORGANIZATION

The College organizes its academic programs and administrative operations
on a decentralized campus basis to increase its responsiveness to student needs.
A Campus Dean and a Campus Coordinator oversee the academic and administrative
functions, respectively, at each campus. Each campus is staffed with personnel
performing admissions, academic counseling, financial aid and career development
functions.

A learning resources center at each campus supports the College's
instructional programs. Each learning resources center contains a library and
computer laboratories and is operated by a full-time manager and support staff.

CURRICULUM

The College offers a business-oriented curriculum to equip students with
specialized knowledge and skills for careers in business, industry and
government. The Academic Curriculum Committee reviews and revises the College's
course offerings periodically to improve the educational programs and respond to
changing and

25
<PAGE> 27

competitive job markets. The College formed a Curriculum Advisory Board in 1993
to support the program evaluation process. The Curriculum Advisory Board
consists of College faculty, current and former Strayer students, and
representatives of more than 20 private and federal sector employers in the
greater Washington, D.C. area. The Curriculum Advisory Board also studies the
career progress of College alumni. The College uses these studies to make
decisions about curriculum development, resource allocation and faculty
appointments.

The College offers programs in the following areas:

BACHELOR OF SCIENCE (B.S.) DEGREE
Accounting
Business Administration
Computer Information Systems
Economics

ASSOCIATE IN ARTS (A.A.) DEGREE
Accounting
Business Administration
Computer Information Systems
Economics
General Studies
Marketing

MASTER OF SCIENCE (M.S.) DEGREE
Business Administration
Information Systems
Professional Accounting

DIPLOMA (CAREER DIVISION)
Computer Information Systems

Each undergraduate degree program emphasizes oral and written communication
skills as well as mathematics and various disciplines in the humanities and
social sciences. In addition to its degree programs, the College offers classes
to non-degree, non-program students wishing to take courses for personal or
professional enrichment. Enrollment of these students at the College has
expanded significantly in recent periods.

Although all of the College's programs and courses are offered at each
campus, the College adapts its offerings to the preferences of the student
population at each location. In addition, Strayer students may enroll in courses
at more than one campus. The following table shows Strayer's enrollment by
major, degree program and campus location at the beginning of the 1995 Fall
quarter:

26
<PAGE> 28

COLLEGE ENROLLMENT BY MAJOR, DEGREE PROGRAM
AND CAMPUS LOCATION -- 1995 FALL QUARTER

<TABLE>
<CAPTION>
CAMPUS
--------------------------------------------------------------------------------------------------------
WASHINGTON, TAKOMA
MAJOR DEGREE D.C. PARK ARLINGTON ALEXANDRIA WOODBRIDGE LOUDOUN MANASSAS FREDERICKSBURG TOTAL
- ------------------------ ------ ----------- ------ --------- ---------- ---------- ------- -------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accounting.............. AA 50 12 11 9 11 10 8 13 124
BS 122 43 70 64 72 56 79 72 578
MS 25 8 28 15 7 7 6 8 104
Business
Administration........ AA 122 42 30 30 29 27 26 50 356
BS 242 90 194 179 192 167 174 168 1,406
MS 83 49 111 77 57 46 52 56 531
Computer Information
Systems............... DP 79 94 47 78 55 39 68 68 528
AA 153 52 62 60 55 52 34 81 549
BS 284 137 243 371 296 244 223 190 1,988
Information Systems..... MS 48 31 75 60 65 36 40 47 402
Economics............... AA 3 -- 1 1 -- -- -- 1 6
BS 10 5 4 8 2 -- 2 -- 31
General Studies......... AA 11 5 8 5 7 -- 1 5 42
Marketing............... AA 7 5 3 5 2 -- 1 1 24
Non-Degree/Non-Program*..NDNP 206 86 144 79 30 134 83 24 786
----- --- ----- ----- --- --- --- --- -----
Total........... 1,445 659 1,031 1,041 880 818 797 784 7,455
===== === ===== ===== === === === === =====
</TABLE>

- ---------------
* Includes undeclared majors.

The College allows students to apply credits earned in one program toward
attainment of a more advanced degree. For example, a student originally pursuing
a Diploma in Computer Information Systems can extend his original objective by
taking additional courses leading to an associate's degree in Computer
Information Systems, a bachelor's degree in Computer Information Systems, and
ultimately a master's degree in Information Systems. The curriculum design
provides students a level of competency and a measure of achievement in the
event they interrupt their education or choose to work in their field of
concentration prior to obtaining their final degree.

The following table illustrates the number of degrees and diplomas
conferred by Strayer in each of the last five academic years:

DEGREES AND DIPLOMAS CONFERRED
FOR THE ACADEMIC YEARS 1991 TO 1995

<TABLE>
<CAPTION>
ACADEMIC YEAR ENDED
--------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Diplomas................................... 323 714 826 702 652
Associate's Degrees........................ 115 129 168 217 239
Bachelor's Degrees......................... 285 398 453 673 787
Master's Degrees........................... 91 161 193 290 293
--- -------- -------- -------- --------
Total............................ 814 1,402 1,640 1,882 1,971
====== ====== ====== ====== ======
</TABLE>

27
<PAGE> 29

FACULTY

The College seeks to appoint faculty who hold appropriate academic
credentials, are dedicated and active professionals in their field, and are
committed to teaching working adults. The following chart shows the highest
earned degrees of the College's faculty at the beginning of the 1996 Spring
quarter:

DISTRIBUTION BY HIGHEST EARNED DEGREE -- 1996 SPRING QUARTER

<TABLE>
<CAPTION>
DEGREES FULL-TIME PART-TIME
--------------------------------------------------------- --------- ---------
<S> <C> <C>
Ph.D. ................................................... 21 40
Ed.D. ................................................... 1 3
D.Sc. ................................................... 3 2
J.D. .................................................... 1 11
Master's................................................. 44 185
Bachelor's............................................... -- 17
Other:
D.C.M. ............................................. -- 1
D.P.A. ............................................. -- 2
Th.D. .............................................. -- 1
--
---
Total.......................................... 70 262
======= =======
</TABLE>

In accordance with its educational mission, the College focuses the efforts
of its faculty on teaching. The normal load for a full-time faculty member is
four courses per quarter for each of three quarters, or 12 courses per academic
year. With the approval of the Campus Deans, faculty members may teach a fifth
course per quarter and extra courses during the summer quarter for additional
compensation. The College requires full-time faculty members to hold counseling
hours at least two hours per week for each course they teach.

Strayer provides financial support for faculty members seeking to update
their skills and knowledge. The College maintains a tuition plan that reimburses
instructors enrolled in advanced degree programs for one-half of their tuition
charges. Strayer conducts annual in-house faculty workshops in each discipline.
The College also fully reimburses its faculty for their costs in receiving
computer-related instruction and training to keep current in information
technology developments.

ACCREDITATION AND APPROVALS

The College was accredited by Middle States in 1981. Accreditation is a
system for recognizing educational institutions and their programs for
performance, integrity and quality that entitles them to the confidence of the
educational community and the public. In the United States, this recognition
comes primarily through private voluntary associations of institutions and
programs of higher education. These associations establish criteria for
accreditation, evaluate institutions and professional programs for
accreditation, and publicly designate those which meet their criteria.
Accredited schools are subject to periodic review by accrediting bodies to
ensure that the schools maintain the performance, integrity and quality required
for accreditation.

Middle States reaffirmed the College's accreditation in 1995. The College
is required to submit an interim status report to Middle States in 1997, and the
next scheduled evaluation visit by Middle States is currently set for the
academic year 1999-2000. See "Licensing, Accreditation and Financial Aid
Regulation -- Accreditation."

Middle States is the same accrediting agency that grants institutional
accreditation to other degree-granting public and private colleges and
universities in its region. Accreditation by Middle States is an important
attribute of the College. College and university administrators depend on
accreditation in evaluating transfers of credit and applications to graduate
schools. Employers rely on the accredited status of institutions when evaluating
a candidate's credentials, and parents and high school counselors look to
accreditation for

28
<PAGE> 30

assurance that an institution has quality educational standards. Moreover,
scholarship commissions often restrict their awards to students attending
accredited institutions, and institutional accreditation is necessary to qualify
for eligibility for federal student financial assistance.

The College is permitted to grant degrees by each state in which the
College offers educational programs. The College is currently licensed by the
D.C. Education Licensure Commission and the State Council of Higher Education
for Virginia. In February 1996, the Maryland Higher Education Commission
approved the College's application to operate in Maryland as an out-of-state
institution. See "Licensing, Accreditation and Financial Aid Regulation -- State
Licensure."

The College is authorized by the Immigration and Naturalization Service of
the U.S. Department of Justice to admit foreign students. The College also
employs certain foreign faculty members and administrators in accordance with
U.S. immigration laws. See "Licensing, Accreditation and Financial Aid
Regulation -- Immigration." In addition, Strayer is approved for the education
of veterans and members of the selective reserve and their dependents, as well
as for the rehabilitation of handicapped students. Approximately 7% of the
College's students are veterans or reservists. See "Licensing, Accreditation and
Financial Aid Regulation -- Veterans Benefits."

STUDENT CHARACTERISTICS

The College's students are primarily working adults. At the beginning of
the 1995 Fall quarter, approximately 62% of the enrollment consisted of
part-time students and approximately 69% attended classes at night or on
week-ends. Women constituted approximately 55% of Strayer's students, and the
approximate age distribution of current Strayer students was as follows:

<TABLE>
<CAPTION>
PERCENTAGE
AGE OF STUDENTS
----------------------------------------------------------------- -----------
<S> <C>
21 and under..................................................... 8%
22 to 29......................................................... 32%
30 to 39......................................................... 35%
40 to 49......................................................... 19%
50 and over...................................................... 3%
Unknown.......................................................... 3%
</TABLE>

At the beginning of the 1995 Fall quarter, approximately 69% of the
College's enrollment consisted of Virginia residents. Maryland residents and
District of Columbia residents accounted for 20% and 11% of the enrollment,
respectively. Reflecting the attraction of the greater Washington, D.C. area for
international students, students from over 50 countries collectively represented
9% of the 1995 Fall quarter enrollment.

STUDENT RECRUITMENT

The College focuses its recruitment efforts on attracting students with the
motivation and ability to complete its business-oriented educational programs.
To generate interest among potential students, Strayer's marketing staff
primarily employs direct mailings and television, radio and newspaper
advertising. The College monitors the effectiveness of its various marketing
efforts in producing student enrollment. Referrals constitute the most important
source of inquiries from potential students.

The marketing department tracks and forwards to the College's admissions
representatives responses to its direct mail and advertising campaigns.
Admissions representatives at each campus pursue expressions of interest in
Strayer by arranging interviews for prospective students. The representatives
also conduct campus tours and otherwise assist prospective students in the
application process. At March 31, 1996, the College employed 51 admissions
representatives.

The College has entered into articulation agreements with Germanna
Community College, Northern Virginia Community College and Prince George's
Community College to facilitate enrollment of students

29
<PAGE> 31

seeking to transfer course credits earned at these institutions. The College
sponsors recruitment events at the campuses of each of these community colleges.

STUDENT ADMISSIONS

The College seeks to ensure that incoming students have the necessary
academic background to succeed in their course of study at Strayer. Students
attending the College's undergraduate programs must possess a high school
diploma or a General Educational Development Certificate. All students must also
pass placement exams or submit acceptable standardized test scores. For
admission to the College's degree programs, students must attain a certain level
of proficiency in English and mathematics. Students attending the College's
graduate programs must have a bachelor's degree from an accredited institution.
If a student's undergraduate major varies widely from the student's proposed
graduate course of study, certain undergraduate foundation courses may be
necessary for admission to some of the highly technical courses offered at the
graduate level.

International students applying for admission must meet the same admission
requirements as other students. Those students whose native language is not
English must provide evidence that they are able to use the English language
with sufficient facility to do college-level work in an English-speaking
institution.

TUITION AND FEES

Strayer charges tuition by the credit hour. All courses offered are 4.5
credit hours. As of January 1, 1996, undergraduate, full-time students are
charged at the rate of $160 per credit hour. Undergraduate, part-time students
are charged at the rate of $170 per credit hour. Courses in graduate programs
are charged at the rate of $230 per credit hour. Accordingly, a full-time
student seeking to obtain a bachelor's degree in four years currently would pay
approximately $7,200 per year in tuition. The College implemented tuition
increases of 8.3%, 7.7% and 7.1% in 1993, 1994 and 1995, respectively.

Generally, tuition must be paid (or arrangements made therefor) prior to
the beginning of a quarter. If a student withdraws from a course before
completion, federal regulations permit the College to retain a specified
percentage of the tuition, which varies with the percentage of the course
completed.

Students finance their Strayer education in a variety of ways. A
significant number of students utilize federal financial aid programs. In
addition, many of Strayer's working adult students finance their own education
or receive full or partial tuition reimbursement from their employers. Strayer
offers grants, loans (including loans under the SEL Program), scholarships and
work-study programs as financing options for its students. Strayer students are
eligible to receive awards from the Strayer College Educational Foundation, a
non-profit organization that provides scholarships and grants to college
students, active duty military personnel and high school students in the greater
Washington, D.C. area. Through March 31, 1996, the Foundation has awarded
$42,000 in grants and scholarships.

SEL PROGRAM

In 1995, Strayer began the SEL Program of loans for eligible students as an
alternative to government-sponsored student loans. In 1995 and the three months
ended March 31, 1996, the College originated SEL loans of approximately $1.4
million and $650,000, respectively. The SEL Program enables the College to
reduce the significant administrative costs incurred by it in processing loans
under Title IV Programs and lessens the College's dependence on federal student
financial aid programs. The College believes that the SEL Program also helps it
to attract and retain qualified students.

The College designed the SEL Program for working adult students. The loans
have maturities ranging from one to six years and bear interest at a fixed rate
that is competitive with rates under Title IV Programs. Monthly loan payments
begin the first month after the loan date and generally vary between $200 and
$300, including loan principal as well as interest. Borrowers make principal
payments while still enrolled, thereby reducing the debt they otherwise would
assume upon completion of their studies. At March 31, 1996, there were a total
of 739 loans outstanding with an aggregate loan balance of approximately $1.3
million and an average individual loan balance of approximately $1,700.

30
<PAGE> 32

Loans under the SEL Program are unsecured. Strayer's underwriting involves
a credit evaluation of each applicant. See "Risk Factors -- Risks of SEL
Program."

All loans under the SEL Program are purchased from the College and serviced
by an affiliated company, ELP. Upon completion of the Offering, the Company will
acquire ELP, which thereafter will be operated as a wholly-owned subsidiary of
the Company. See "Reorganization -- Acquisition of ELP" and "Certain
Transactions -- Transactions with ELP." The College intends to expand the SEL
Program after the Offering. A portion of the net proceeds of the Offering will
be applied to fund ELP's operations. See "Use of Proceeds."

STUDENT RETENTION

Strayer dedicates significant resources to assisting students in overcoming
the personal and academic obstacles that can interfere with completion of a
course of study. Each campus provides students with scheduled tutoring sessions
and with academic counseling centers that are staffed by full-time faculty
members for eight hours each week day. In addition, the College assigns each
student an academic adviser and offers developmental courses for students whose
record indicates a need for academic support. Strayer considers factors relating
to student retention in the performance evaluation of every full-time faculty
member.

Notwithstanding Strayer's student retention programs, some students at the
College, as in other higher education institutions, end their studies prior to
program completion. In the last five award years, the College's student
withdrawal rate ranged from approximately 23% to approximately 27%. The
withdrawal rate for the 1994-95 federal award year was 23.7%. Student
withdrawals have a negative regulatory, financial and marketing effect on the
College. See "Licensing, Accreditation and Financial Aid Regulation -- Financial
Aid Regulation -- Administrative Capability." The College experiences some
decline in student enrollment during each academic quarter from the enrollment
level at the beginning of the quarter. The College is obligated to make refunds
of unearned tuition with respect to students who withdraw during an academic
quarter.

CAREER DEVELOPMENT SERVICES

The College actively assists its students and alumni with job placement and
other career-related matters through career development offices located at all
eight campuses. Strayer's career development personnel conduct workshops on
employment-related topics (including resume preparation, interviewing techniques
and job search strategies), maintain job listings, arrange campus interviews by
employers and provide other placement assistance. The College sponsors career
fairs in the Fall and Spring quarters for students and alumni to discuss career
opportunities with companies and governmental agencies in the greater
Washington, D.C. area. Over 50 employers attended the career fair held in the
1995 Fall quarter.

The College conducts annual alumni surveys to monitor the career
progression of its graduates and to comply with Middle States and state
requirements to perform outcome assessments. The reliability of the survey data
largely depends on the information reported to the College. The 1995 alumni
survey, which had an approximately 10% overall response rate, indicated that
only 5% of those responding were unemployed. Approximately 77% of undergraduate
alumni indicated that their Strayer education sufficiently prepared them for
their present occupation and approximately 80% of graduate degree alumni credit
Strayer for the achievement of their professional goals. According to the
survey, Strayer's greatest assets, in order of importance, are campus locations,
schedule variety, instructor knowledge and class sizes.

Strayer students and graduates are employed in a wide range of regional and
local companies, many of whom are in the information technology industry.
Federal governmental agencies also provide a significant source of employment.

COMPETITION

The postsecondary education market in Strayer's market area is highly
competitive. The College competes with traditional public and private two-year
and four-year colleges, other for-profit schools and

31
<PAGE> 33

alternatives to higher education, such as employment and military service.
Public colleges may offer programs similar to those of the College at a lower
tuition level, due to government subsidies, government and foundation grants,
tax-deductible contributions and other financial sources not available to
proprietary institutions. Tuition at private institutions is generally higher,
and in some cases significantly higher, than the tuition at the College. Many of
the College's competitors have greater financial and personnel resources than
the College.

The College competes with other educational institutions primarily based on
the quality of its business-oriented curriculum and instruction, its flexible
schedules and convenient classroom locations, and its responsiveness to changing
educational requirements of the workplace. Few of the College's competitors have
modified their programs to meet the special needs of working adult students,
although management believes that more may do so in the future.

EMPLOYEES

At March 31, 1996, the College employed 332 faculty members, of whom 70
were full-time and 262 part-time, and 269 non-faculty staff in information
systems, financial aid, recruitment and admissions, payroll and human resources,
corporate accounting and other administrative functions. Of the College's
non-faculty staff, 190 were employed full-time and 79 part-time.

LEGAL PROCEEDINGS

By letter dated April 11, 1996, an attorney representing one former and
three present employees of the College made demand upon the College for payment
to preclude further action by the claimants with respect to certain allegations
of various forms of discrimination. The claimants consist of one current
administrator of the College, who has filed a discrimination claim with the
Equal Employment Opportunity Commission (the "EEOC"), two faculty members who
are former College administrators, one of whom has taken no administrative
action and the other of whom has filed a discrimination claim with the EEOC and
the Arlington County Office of Human Rights (the latter claim having been
subsequently withdrawn), and one former clerical employee, who has filed a
discrimination claim with the Alexandria Office of Human Rights. Each claim is
based on a different set of facts and alleges different forms of discrimination,
including gender, race and national origin. Although no suits have been filed,
the attorney representing each of the claimants in the above noted letter sent
on behalf of the four claimants has made demand for $500,000 and attorneys' fees
for each claimant. The College has investigated each of the matters and believes
it has meritorious defenses in each. Accordingly, the College intends to present
its position strongly in the event of litigation. There can be no assurance that
the College will be successful in these matters; however, the College does not
believe that the ultimate resolution of these matters will have a material
impact on the College's financial position or results of operations.

From time to time, the College is involved in litigation and other legal
proceedings arising out of the ordinary course of its business. As of the date
of this Prospectus, there were no pending material legal proceedings to which
the Company was subject or to which the Company's property was subject.

NEW CAMPUSES

The College considers a number of factors in determining the location of a
new campus. The site must be in an area where the College has (or can obtain)
the necessary regulatory authorization to do business, where there is proximity
to a large number of working adults and where there is a concentration of
technology-oriented employers. The College normally avoids areas it believes are
adequately served by competitive institutions. Within an appropriate area,
specific site selection involves criteria such as convenience and accessibility.

The Company expects to incur operating losses at each new campus for at
least the first year of operations. Initial enrollment is expected to include
existing Strayer students for whom the new campus would be more convenient. This
shift would have a negative effect on enrollment at other Strayer campuses.
Approximately 20% of the current student body consists of Maryland residents,
and a substantial portion of these students are expected to enroll at Strayer's
first degree-granting Maryland campus when it opens. Over

32
<PAGE> 34

time, enrollment at that campus is expected to come from other working adults in
the area and from students attending other institutions.

PROPERTIES

The College leases its eight campuses, five of which are owned by
corporations controlled by the College's President, Ron K. Bailey. The leases
with these corporations all have ten-year terms expiring in 2006, with three
five-year renewal terms. Of the remaining leases, two have terms that expire in
1999 and 2002, respectively, with one and two five-year renewal options,
respectively, and the third lease has a term that expires in 1998, with a
three-year renewal option. With the exception of the Arlington campus lease, the
leases contain purchase options. See "Certain Transactions -- Lease of Campus
Facilities" and Note 8 to the College's Financial Statements. The table below
sets forth certain information regarding each of the College's properties at
March 31, 1996:

<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF COMPUTER AREA IN
LOCATION CLASSROOMS WORKSTATIONS SQUARE FEET
------------------------------------------- ---------- ------------ -----------
<S> <C> <C> <C>
Washington, D.C............................ 21 89 30,000
Alexandria, Virginia....................... 15 71 22,000
Arlington, Virginia........................ 12 80 26,000
Woodbridge, Virginia....................... 17 64 20,800
Manassas, Virginia......................... 17 52 20,800
Loudoun Campus (Ashburn), Virginia......... 13 76 21,000
Fredericksburg, Virginia................... 13 62 17,500
Takoma Park (Washington, D.C.)............. 15 48 21,800
</TABLE>

The campuses are easily accessible to major highways or urban thoroughfares
or to the Washington, D.C. area metrorail subway system. The teaching facilities
at each campus are housed in an air-conditioned building that includes spacious
classrooms, a student lounge, faculty offices, a bookstore and a learning
resources center. Seven of the campuses provide free parking.

The College actively monitors facility capacity in light of current
utilization and projected enrollment growth. Since 1990, the College has
relocated its downtown Washington, D.C., Alexandria, Woodbridge and Manassas
campuses to newer and larger facilities and has completed extensive renovations
to the Arlington campus. Management believes the College can accommodate a
significant increase in student enrollment at most of its campuses and can
acquire additional capacity for other campuses on acceptable terms.

LICENSING, ACCREDITATION AND FINANCIAL AID REGULATION

STATE LICENSURE

The College is dependent on the authorization of the applicable agency of
each state within which the College offers educational programs to allow it to
operate and to grant degrees or diplomas to students. The College is subject to
extensive regulation in each of the two jurisdictions (the District of Columbia
and Virginia) in which it currently operates. State laws and regulations affect
the College's operations and may limit the ability of the College to introduce
educational programs or obtain authorization to operate in certain states. State
authorization is also required in order for an institution to become and remain
eligible to participate in Title IV programs.

The College was granted a permanent license by the D.C. Education Licensure
Commission (the "D.C. Commission") in 1990 following the purchase of the College
by the Current Stockholders. If the D.C. Commission finds an accredited
institution in full compliance with D.C. licensure requirements, the D.C.
Commission grants a permanent license, which remains in effect indefinitely,
subject to periodic review and amendment due to change in ownership,
accreditation status, location, degrees or certificates offered, and other
conditions.

33
<PAGE> 35

After the opening of the Takoma Park campus in 1992, the D.C. Commission
conducted a site visit and issued an evaluation report containing certain
findings of deficiency with respect to advertising and publications, graduate
programs, governance, administration, budgeting, library and computer facilities
and resources, student outcomes assessment, student health and other services,
and access for disabled students. The D.C. Commission is authorized to grant a
provisional license based on its determination that an institution complies, or
within a reasonable period of time can comply, with all applicable regulatory
requirements. A provisional license is issued for a fixed period of time and may
be subject to conditions which the D.C. Commission deems necessary to achieve
full compliance. In March 1993, the D.C. Commission granted the College a
provisional license for a period of three years on the conditions that, among
others, the College submit a progress report by March 1994 and employ a
compliance specialist to assist it in meeting licensure requirements. The
College engaged a compliance specialist and submitted a progress report to the
D.C. Commission in February 1994.

In March 1996, the D.C. Commission extended the College's provisional
license through March 1997, with a site visit planned for the Fall of 1996.
During that site visit the Commission is expected to review the College's
progress in addressing past compliance concerns, the College's operations after
the change in ownership resulting from the Offering and other matters. Because
of these considerations and the likelihood that a permanent license would
require amendment in the near future, the College intends to apply for renewal
of its provisional license for the maximum five-year period.

The College began offering its educational programs in Virginia in 1981.
The Virginia State Council of Higher Education approved the College's Northern
Virginia site in 1982. On November 15, 1995, the State Council of Higher
Education for Virginia granted the College a term of full approval ending
November 30, 1998.

In 1995, the College applied to establish a branch campus in Prince
George's County, Maryland, to offer degree-granting programs up to the master's
degree level in accounting, business administration and computer information
systems. On February 27, 1996, the Maryland Higher Education Commission ("MHEC")
advised the College of the approval of its application to operate in Maryland as
an out-of-state institution. After the College has identified a Maryland campus
site in Prince George's County, the College expects to submit a renewal
application to MHEC, as well as an application to Middle States for extension of
the College's accreditation to the Maryland campus. The College plans to begin
offering instruction at the Maryland campus in early 1997. MHEC has given the
College permission to offer courses at the Computer Sciences Corporation
facilities in Hanover, Maryland, beginning in July 1996.

ACCREDITATION

An institution must be accredited by an accrediting agency recognized by
the Department of Education in order to be eligible to participate in Title IV
Programs. The HEA requires accrediting agencies recognized by the Department of
Education to review many aspects of an institution's operations in order to
ensure that the education or training offered by the institution is of
sufficient quality to achieve, for the duration of the accreditation period, the
stated objective for which the education or training is offered. Under the
Higher Education Amendments of 1992, a recognized accrediting agency must
perform regular inspections and reviews of institutions of higher education,
including unannounced site visits of institutions such as the College that
provide vocational education and training. In accordance with that requirement,
Middle States conducted an unannounced site visit to the College in April 1996
and in its report stated that Strayer had represented itself with honesty and
integrity regarding its prebaccalaureate occupationally specific programs.

Middle States accredited the College in 1981 and reaffirmed the College's
accreditation in November 1995. The College is required to submit an interim
status report in 1997, which will address planning efforts as they relate to
expansion of enrollments and additional off-campus sites and to facilities.
Middle States' next scheduled evaluation visit to the College is currently set
for the academic year 1999-2000. Middle States is scheduled to apply for
continued recognition by the Department of Education in 1996 and has updated
certain of its policies to conform to new HEA requirements. The College expects
that its next accreditation review will be conducted under the new requirements.

34
<PAGE> 36

IMMIGRATION

The College is authorized by the Immigration and Naturalization Service
("INS") of the U.S. Department of Justice to admit foreign students. The College
also employs certain foreign faculty members and administrators in accordance
with U.S. immigration laws. Foreign students, other than resident aliens,
intending citizens, and residents of certain Pacific islands, are ineligible to
participate in Title IV Programs. Immigration legislation pending in Congress
may further restrict the availability of student financial aid to foreign
students. The College has established procedures designed to comply with U.S.
immigration laws. If the College fails to comply with these laws, the INS could
take enforcement action, which could result in the withdrawal of foreign
students enrolled at Strayer, loss of authorization to admit foreign students or
loss of foreign faculty members and administrators.

FINANCING STUDENT EDUCATION

In 1995, approximately 42% of the College's students participated in one or
a combination of several of the federally supported student financial aid
programs. A substantial portion (approximately 46% in 1995) of the College's
revenues are derived from tuition financed under Title IV Programs.

The College's financial aid programs are designed to assist eligible
students whose financial resources are inadequate to meet the cost of education.
Aid is awarded on the basis of financial need, generally defined under the HEA
as the difference between the cost of attending a program of study and the
amount a student can reasonably be expected to contribute to those expenses. All
recipients of financial aid must maintain a satisfactory grade point average and
progress in a timely manner toward completion of a program of study.

Title IV Programs

The College maintains eligibility for its students to participate in the
following Title IV Programs:

Federal Family Education Loans. Pursuant to the Federal Family Education
Loan Program (the "FFEL Program"), which includes the Federal Stafford Loan
("Stafford") program and the Federal PLUS program, students and their parents
can obtain subsidized and unsubsidized student loans. Repayment of Stafford
loans is deferred until six months after the student graduates or withdraws.
Students who demonstrate financial need may qualify for a subsidized Stafford
loan, and the federal government will pay the interest on the loan while the
student is in school and for six months after the student's graduation or
withdrawal. Unsubsidized Stafford loans are available to a student in an amount
up to the difference between the student's estimated cost of attendance at the
institution and the estimated financial assistance reasonably available to that
student. The unsubsidized Stafford loan program now incorporates the former
Federal Supplemental Loans for Students ("SLS") program. In 1995, approximately
36.8% of the College's revenues were derived from Stafford loans. PLUS Loans are
made available to parents of dependent students and accounted for approximately
1.0% of the College's revenues in 1995. The maximum amount of any PLUS loan is
the difference between the student's estimated cost of attendance at the
institution and the estimated financial assistance reasonably available to that
student.

Pell Grants. Grants under the Federal Pell Grant ("Pell") program, which
are available to eligible students based on financial need and other factors,
accounted for approximately 5.1% of the College's revenues in 1995.

Campus-Based Programs. The "campus-based" Title IV Programs include the
Federal Supplemental Educational Opportunity Grant program, the Federal
Work-Study program, and the Federal Perkins Loan ("Perkins") program. These
programs are "campus-based" because the institution has significant
responsibilities for program administration. Tuition received by the College
under the campus-based programs accounted for less than 1.0% of the College's
revenues in 1995.

Direct Student Loans. In 1993, Congress enacted the William D. Ford Direct
Loan Program (the "Direct Loan Program"), under which the Department of
Education makes loans directly to students, rather than guaranteeing loans made
by lending institutions. The Direct Loan Program has been phased in, with 104
schools nationwide selected to participate in the first year of the program
(1994-95) and over 1,350 schools

35
<PAGE> 37

selected to participate in the second year (1995-96). The College has been
selected to participate in this program beginning on July 1, 1996.

Other Financial Aid Programs

In addition to the College's own student loan and scholarship programs,
eligible students at the College may participate in educational assistance
programs administered by the U.S. Department of Veterans Affairs, the U.S.
Department of Defense, the District of Columbia and private organizations.

FINANCIAL AID REGULATION

To be eligible to participate in Title IV Programs, the College must comply
with specific standards and procedures set forth in the HEA and the regulations
issued thereunder by the Department of Education. To participate in Title IV
Programs, an institution must be an "eligible institution," which requires,
among other things, that the institution be authorized by each state within
which it operates to offer its educational programs and be accredited by a
recognized accrediting agency. See "Business -- Accreditation and Approvals."
The institution must also be certified by the Department of Education to
participate in Title IV Programs, which requires, among other things, that the
institution meet certain standards of administrative capability and financial
responsibility. The College is currently certified to participate in Title IV
Programs. The HEA requires the Department of Education to recertify every
institution of higher education participating in Title IV Programs by July 23,
1997, on a schedule established by the Department. The College expects that the
Department of Education will require it to apply for recertification in the near
future.

The regulatory scheme applicable to the College has been subject to
frequent revisions, many of which have increased the level of scrutiny to which
higher education institutions are subjected and raised the applicable standards.
In enacting the Higher Education Amendments of 1992 and the Higher Education
Technical Amendments of 1993, Congress imposed significant new and more
stringent standards governing institutions participating in Title IV Programs,
including new standards for institutional eligibility and the timing, scope of
and procedures for eligibility and certification reviews, accrediting agency
approval and review by state review entities. The new standards are designed to
limit institutional dependence on Title IV Program funds, prevent institutions
with unacceptable student loan default rates from participating in Title IV
Programs and, in general, require institutions to satisfy certain criteria
intended to protect the integrity of the Title IV Programs, notably criteria
regarding administrative capability and financial responsibility.

The new standards are consistent with the increased scrutiny and regulation
to which providers of postsecondary education have been subjected as a result of
increased concern over fraud and abuse in Title IV Programs. Congress and the
Department of Education have recently focused in particular upon the operations
of proprietary institutions, such as the College. Certain elements of the
regulatory scheme applicable to the College are described below.

Increased Regulatory Scrutiny

The 1992 amendments to the HEA formalized, modified and strengthened the
regulatory structure known as the "Program Integrity Triad," which consists of
the Department of Education, recognized accrediting agencies, and state higher
education regulatory bodies. Congress intended this initiative to increase the
regulatory scrutiny of postsecondary educational institutions. In addition to
the Program Integrity Triad, other participants in Title IV Programs, notably
guarantee agencies, also have enforcement authority.

As a result of the implementation of the Program Integrity Triad,
institutions of higher education are subject to greater scrutiny by the
Department of Education, accrediting agencies and possibly state agencies. In
February 1996, the Department of Education issued an advance notice of proposed
rulemaking that proposes to provide regulatory relief to institutions that have
records of outstanding performance in administering Title IV programs and strong
financial responsibility, while focusing the Department of Education's
monitoring and oversight activities on institutions that present a high risk to
federal funds. The regulatory standards in effect at the time of reviews by
regulatory authorities and the College's compliance

36
<PAGE> 38

with those standards may affect the operations of the College and its ability to
participate in Title IV Programs.

Administrative Capability

Recent Department of Education regulations specify extensive criteria by
which an institution must establish that it has the requisite "administrative
capability" to participate in Title IV Programs. As discussed below, the
administrative capability standards include certain requirements relating to the
institution's cohort default rates and its withdrawal rate for its undergraduate
regular students. To meet the administrative capability standards, an
institution must also not be, and not have any principal or affiliate who is,
debarred or suspended from federal contracting or engaging in activity that is
cause for debarment or suspension, and must not otherwise appear to lack
administrative capability.

If the Department of Education determines that an institution is not
administratively capable solely because it fails to comply with the cohort
default rate standards of administrative capability, the Department will certify
the institution's continuing eligibility to participate in Title IV Programs on
a provisional basis for no more than three years. During the period of
provisional certification, the institution must comply with any additional
conditions included in its program participation agreement. If the Department of
Education determines that a provisionally certified institution is unable to
meet its responsibilities under its program participation agreement, it may
revoke the institution's provisional certification and terminate its
participation in Title IV programs.

The College measures its student withdrawal rate in accordance with
Department of Education regulations, which until July 1, 1995, required
institutions such as the College to calculate student withdrawal rates based on
an eight-month period, and which currently require calculation based on the
federal award year. In the last five award years, the College's student
withdrawal rate ranged from approximately 23% to approximately 27%. The
College's withdrawal rate for the applicable eight months of the 1994-95 award
year was 23.7%.

Based on an inspection conducted by the Office of Inspector General of the
Department of Education in mid-1992, the Department of Education concluded that
there were serious deficiencies at that time in the College's administration of
federal student financial aid programs. The Department of Education cited late
and unpaid refunds, lack of refund notification, unpaid credit balances, a high
student withdrawal rate, lack of exit counseling documentation, incorrect loan
certifications and missing financial aid transcripts. Because of these
deficiencies, the Department of Education transferred the College from the
"advance" system of payment, under which the Department of Education accepts an
institution's request for funds and transfers the amount requested (subject to
annual audit), to the "reimbursement" system of payment, under which the
institution must disburse funds to eligible students and document their
eligibility for the aid requested before receiving funds from the Department of
Education. The College disputed various of the Department of Education's
findings but took steps to correct certain institutional weaknesses identified
by the Department of Education, including creating new administrative positions
dealing with Title IV Programs, hiring additional financial aid officers,
increasing training for financial aid officers and other College officials,
preparing a financial aid manual, and developing new computer systems. Further,
following an internal audit, the College in 1993 and 1994 repaid to the
government certain Title IV funds for which the College determined its
documentation was inadequate. Following these remedial actions, the Department
of Education returned the College to the advance system of payment, effective
December 7, 1995.

Based on the Department of Education review, the College's principal
guaranty agency, American Student Assistance Corporation ("ASA") imposed a
temporary emergency suspension on the College in April 1993. After conducting a
program review, ASA limited its guaranty to loans for students who had previous
loans guaranteed by ASA. In December 1993, after conducting a followup review,
ASA removed the limitation on the College's participation in the FFEL guaranteed
student loan programs. In August 1994, ASA advised the College that its
corrective measures and plan of action were satisfactory and the program review
was closed.

37
<PAGE> 39

Department of Education regulations permit an institution to enter into a
written contract with a third-party servicer for the administration of any
aspect of the institution's participation in Title IV Programs. The third-party
servicer must, among other obligations, comply with Title IV requirements and be
jointly and severally liable with the institution for any violation by the
servicer of any Title IV provision. The College has written contracts with two
third-party servicers, which it has, as required, reported to the Department of
Education. Financial Aid Management for Education, Inc., which has served the
College since 1983, certifies FFEL Program loan applications, prepares reports
from the College to the Department of Education, issues checks for the Pell and
campus-based programs, and issues and collects Perkins loans. ELP provides
training for financial aid employees, development and support for automated
systems for the administration of Title IV Programs, temporary financial aid
staff as needed, consulting and regulatory support for financial aid staff, and
compliance audits, storage, and responses to inquiries regarding inactive
student files and administration of a default management plan. ELP also serves
as liaison between the College and Unger and Associates, Inc., which provides
certain default management services to the College in connection with the FFEL
Programs, including notices to students of the commencement of their repayment
obligations, skiptracing, and preclaims assistance.

Financial Responsibility

Recent amendments to the HEA and the Department of Education's regulations
prescribe extensive standards of financial responsibility that institutions such
as the College must satisfy to participate in Title IV Programs. Among these
standards of financial responsibility are general standards requiring the
institution to provide the services described in its official publications and
statements; to provide the administrative resources necessary to comply with
Title IV requirements; and to meet all of its financial obligations, including
required refunds and any repayments to the Department of Education for debts and
liabilities incurred in programs administered by the Department. A for-profit
institution such as the College must: (i) demonstrate an "acid test" ratio
(defined as the ratio of cash, cash equivalents and current accounts receivable
to total current liabilities) of at least 1-to-1 at the end of its latest fiscal
year; (ii) not have had operating losses in either or both of its two latest
fiscal years that in sum result in a decrease in tangible net worth in excess of
10% of the tangible net worth at the beginning of the two-year period; and (iii)
have had a positive tangible net worth for its latest fiscal year. For the
fiscal year ended December 31, 1995, the College's "acid test" ratio was equal
to 1.44 to 1. Unless the institution meets specific alternative criteria, it
must submit an irrevocable letter of credit, payable to the Department of
Education, in an amount equal to 25% of the total dollar amount of refunds that
the institution paid on Title IV Programs in the previous fiscal year. The
College has obtained such a letter of credit in the amount of $500,000. An
institution will not be considered to be financially responsible if it or a
person exercising substantial control over it meets certain detailed indicators
of poor past performance, including unpaid liabilities for Title IV violations,
recent limitation, suspension or termination actions, recent audit or program
review findings resulting in repayment of more than 5% of Title IV funds
received for the relevant year, failure to submit timely and acceptable audit
reports, and failure to resolve satisfactorily program review or audit findings.
Based on its audited financial statements for 1995, as submitted to the
Department of Education, the College believes it satisfies each of the
applicable financial responsibility standards.

Student Loan Defaults

Under the HEA, an educational institution may lose its eligibility to
participate in some or all of the Title IV Programs if defaults on the repayment
of federally guaranteed student loans by its students exceed certain rates. A
rate of student defaults (known as a "cohort default rate") is calculated for
each institution annually by determining the rate at which borrowers who become
subject to their repayment obligation in one federal fiscal year default by the
end of the following federal fiscal year. For certain purposes described below,
the Department of Education calculates a weighted average cohort default rate
for the institution's students who enter repayment and default on a FFEL Program
or Direct Loan Program loan.

If the Department of Education notifies an institution that its cohort
default rate for FFEL Program loans equals or exceeds 25% for each of the three
most recent consecutive federal fiscal years, the institution's

38
<PAGE> 40

participation in the FFEL Program ends 30 days after the notification, unless
the institution timely appeals that determination on specified grounds and
according to specified procedures. An institution's participation in the Direct
Loan Program ends 30 days after notification that any combination of its FFEL
Program cohort default rate, its Direct Loan Program cohort default rate, or its
weighted average cohort default rate equals or exceeds 25% for each of the three
most recent federal fiscal years, unless the institution timely appeals. An
institution whose participation terminates under these provisions may not
participate in the relevant program for a period of up to three federal fiscal
years. An institution that is deemed ineligible to participate in a Title IV
Program based on a final default rate determination under the FFEL or Direct
Loan Programs after February 14, 1996 is also barred from receiving funds under
the Pell Grant program. The Department of Education also may initiate a
proceeding to limit, suspend or terminate an institution's participation the
FFEL Program if it has any combination of a FFEL Program, Direct Loan Program or
weighted average cohort default rate that is equal to or greater than 25% for
each of the three most recent consecutive federal fiscal years. The Department
of Education may initiate a proceeding to limit, suspend or terminate an
institution's participation in all Title IV Programs if it has a FFEL Program,
Direct Loan Program or weighted average cohort default rate that exceeds 40% for
any federal fiscal year.

In addition, an institution is considered to lack administrative capability
if its cohort default rate for the Stafford and SLS programs for any of the
three most recent federal fiscal years equals or exceeds 25% or if its cohort
default rate for the Perkins loan program equals or exceeds 15% in any federal
award year (provided that if fewer than 30 students enter repayment during a
given year, the default rate is calculated on a three-year basis). The College's
cohort default rates on federally guaranteed student loans for the 1991, 1992
and 1993 federal fiscal years, the most recent years for which final information
is available, were 14.1%, 10.6% and 16.6%, respectively. The average default
rates for proprietary institutions nationally were 30.2% and 23.9% in fiscal
years 1992 and 1993, respectively. The College's Perkins loan default rates in
federal award years 1994 and 1995 were 4.0% and 11.6%, respectively.

The 85/15 Rule

Under what is commonly referred to as the "85/15 Rule," the HEA provides
that proprietary institutions, such as the College, are eligible to participate
in Title IV Programs only if they derive no more than 85% of their revenues from
Title IV Programs, as determined in accordance with a formula in the
regulations. A proprietary institution that violates the 85/15 Rule loses its
eligibility to participate in Title IV Programs for at least one federal fiscal
year. During the 1995 federal fiscal year, the College derived 46% of its
revenues from tuition financed under Title IV Programs.

Incentive Compensation

As a part of an institution's program participation agreement with the
Department of Education, the institution must certify that it will neither
provide, nor contract with any entity that provides, any commission, bonus or
other incentive payment based directly or indirectly on success in securing
enrollments or financial aid to any person or entity engaged in any student
recruitment, admission or financial aid awarding activity. Although there can be
no assurance that the Department of Education will not find deficiencies in the
College's present or former compensation plans, the College believes that its
compensation plan complies with the HEA.

Potential Effect of Regulatory Violations

If the College fails to comply with the regulatory standards governing
Title IV Programs, the Department of Education could impose one or more
sanctions, including transferring the College to the reimbursement system of
payment, requiring repayment of certain Title IV funds, certifying the College's
eligibility on a provisional basis, taking emergency action, referring the
matter for criminal prosecution, or initiating proceedings to impose a fine or
to limit, suspend or terminate the participation of the College in Title IV
Programs. In addition, the College's guarantee agencies could limit, suspend or
terminate its eligibility in the event of certain regulatory violations.
Although there are no such sanctions currently in force, and the College does
not believe any such sanctions are contemplated, if such sanctions were imposed
against the College and

39
<PAGE> 41

resulted in a substantial curtailment of the College's participation in Title IV
Programs, the College would be materially and adversely affected.

If the College lost its eligibility to participate in Title IV Programs, or
if the amount of available federal student financial aid were reduced, the
College would seek to arrange or provide alternative sources of revenue or
financial aid for students. A number of private organizations provide loans to
students. Although the College believes that one or more private organizations
would be willing to provide financial assistance to students attending the
College, there is no assurance that this would be the case, and the interest
rate and other terms of such student financial aid might not be as favorable as
for Title IV Program funds. The College may be required to guarantee all or part
of such alternative assistance or might incur other additional costs in
connection with securing alternative sources of financial aid. Accordingly, the
loss of eligibility of the College to participate in Title IV Programs would be
expected to have a material adverse effect on the College even if it could
arrange or provide alternative sources of revenue or student financial aid.

RESTRICTIONS ON ADDING LOCATIONS AND EDUCATIONAL PROGRAMS

State requirements and accrediting agency standards may in certain
instances limit the ability of the College to establish additional locations and
programs. District of Columbia regulations require institutions to submit an
application for an amended license in order to add a new program or location.
The Virginia State Council of Higher Education requires institutions to obtain
approval prior to offering new educational programs at existing sites or
instruction for degree credit at a new site located more than 25 miles or 30
minutes' travel time from a central location. Maryland law and regulations
require institutions to obtain the approval of MHEC in order to offer an
instructional program not specified in its certificate of approval or to offer
more than one-third of the credit-bearing coursework leading toward a
certificate or degree at a location not specified in its certificate of
approval. Middle States requires institutions that it accredits to notify it in
advance of implementing new programs or locations, and upon notification may
undertake a review of the institution's accreditation. Based on its current
understanding of how these standards will be applied, the College does not
believe that these standards will have a material adverse effect on the College
or its expansion plans.

The HEA requires proprietary institutions of higher education to be in full
operation for two years before qualifying to participate in Title IV Programs.
However, the applicable regulations permit an institution that is already
qualified to participate in Title IV Programs to establish an additional
location that may immediately qualify, unless the location was acquired from
another institution that has ceased offering educational programs at that
location and has unpaid Title IV liabilities. The new location must satisfy all
other applicable requirements for institutional eligibility, including approval
of the additional location by the relevant state authorizing agency and the
institution's accrediting agency. In addition, a location that qualifies as a
"branch campus" must meet extensive regulatory requirements, including the
standards of administrative capability and financial responsibility discussed
above. The College's expansion plans assume its continued ability to establish
new campuses as additional locations of the College's main campus without
incurring the two-year delay in participation in Title IV Programs. The loss of
state authorization by the College or an existing campus, or the failure of the
College or a new campus to obtain state authorization, would render the College
ineligible to participate in Title IV programs in that state or location.

The Department of Education requires an institution to provide notice of an
additional location that offers at least 50%, but less than 100%, of an
educational program. The Department of Education may, in its discretion, require
the institution to apply to include such a new location in its eligibility
notification. The Department of Education bases its determination of whether to
require such an application on the percentage of an educational program that is
offered at the new location and on the financial and administrative capability
of the institution. An institution must apply to the Department of Education to
include in its eligibility designation a new branch campus or a new location at
which it offers 100% of an educational program.

Generally, if an institution eligible to participate in Title IV Programs
adds an educational program after it has been designated as an eligible
institution, the institution must apply to the Department of Education to have
the additional program designated as eligible. However, an institution is not
obligated to obtain the

40
<PAGE> 42

Department of Education's approval of an additional program that leads to an
associate, baccalaureate, professional or graduate degree or which prepares
students for gainful employment in the same or related recognized occupation as
an educational program that has previously been designated as an eligible
program at that institution and meets certain minimum length requirements. In
the event that an institution erroneously determines that an educational program
is eligible for Title IV funds without the Department of Education's express
approval, the institution will be liable for repayment of Title IV aid provided
to students in that program. The College does not believe that the Department of
Education's regulations will create significant obstacles to its plans to add
new programs.

DISTANCE LEARNING

State law and accrediting agency standards may regulate telecommunications
or correspondence courses offered by the College, which may include courses
offered through the Internet. The D.C. Commission requires that a course or
program offered by "correspondence, extension, or in summer session" be
consistent with the objectives and purposes of the institution and "consistent
with and comparable in quality" to courses offered to students regularly
enrolled on a full-time basis. If the College's courses offered through the
Internet failed to meet this standard, that failure could provide a basis for
adverse action by the D.C. Commission, including termination of the College's
license. Virginia requires out-of-state institutions such as the College to
obtain approval from the Virginia State Council of Higher Education before
offering any telecommunications activity at a site in Virginia.
Telecommunications activity includes any course for degree credit or program of
study where the primary mode of delivery to a site is television, video cassette
or disc, film, radio, computer, or other telecommunications devices. Middle
States has appointed a task force to develop guidelines for conducting distance
learning programs.

The HEA provides that an institution generally is not eligible to
participate in Title IV Programs if it offers more than 50% of its courses by
correspondence. The implementing regulations state that an institution is
ineligible for Title IV Programs if for its latest complete award year more than
50% of the institution's courses were correspondence courses or 50% or more of
the institution's students were enrolled in correspondence courses. Department
of Education regulations define a "telecommunications course" as a "course
offered in an award year principally through the use of television, audio, or
computer transmission, including open broadcast, closed circuit, cable,
microwave, or satellite, audio conferencing, computer conferencing, or video
cassette or discs." Accordingly, the courses the College currently offers
through the Internet constitute "telecommunications courses" under the
Department of Education regulations. If the combined number of correspondence
and telecommunications courses amount to greater than 50% of the institution's
course offerings that year, telecommunications courses are included among
correspondence courses for purposes of determining eligibility for participation
in Title IV Programs.

The current levels of correspondence and telecommunications course
offerings at the College are well within the regulatory guidelines for Title IV
eligibility. The College intends to expand the availability of on-line course
offerings in a manner consistent with applicable regulatory requirements. See
"Business -- Business Strategy."

CHANGE IN OWNERSHIP RESULTING IN A CHANGE OF CONTROL

Many states and accrediting agencies require institutions of higher
education to report or obtain approval of certain changes in ownership or other
aspects of institutional status, but the types of and triggers for such
reporting or approval vary among states and accrediting agencies. The D.C.
Commission may require an institution licensed by it to apply to amend its
license prior to a change in ownership. The applicable laws and regulations of
Virginia and Maryland do not specifically address reporting of changes in
ownership. The College's accrediting agency, Middle States, requires
institutions that it accredits to inform it in advance of any substantive
change, including a change that significantly alters the ownership or control of
the institution. Examples of substantive changes requiring advance notice to
Middle States include changes in the legal status, ownership or form of control
of the institution, such as the sale of a proprietary institution or the
beginning or ending of public sponsorship and control. Middle States must
approve a substantive change in advance in order to include the change in the
institution's accreditation status.

41
<PAGE> 43

Upon a change in ownership resulting in a change of control of the College,
as defined in the HEA and the Department of Education's regulations, the College
would lose its eligibility to participate in Title IV programs for an
indeterminate period of time while it applied to regain eligibility and would
thus be ineligible to receive Title IV funding during the reapproval period.
Department of Education regulations prevent an institution from avoiding a lapse
in its Title IV eligibility by applying to reestablish its eligibility before
the transfer of ownership and control is completed, although a transfer is
considered complete if it is otherwise final but subject to the condition of
subsequently obtaining approval from the Department of Education, the
accrediting agency or state regulatory authorities.

Based in part on advisory letters that the Department of Education, Middle
States and certain of the applicable state authorizing agencies issued in
connection with the Offering, the Company does not believe that the
Reorganization or the Offering will constitute a change in ownership resulting
in a change of control under these standards. Nevertheless, upon completion, the
Reorganization and the Offering must be reported to the Department of Education,
Middle States and applicable state licensing agencies, and the reporting could
subject the College to further review by any of those bodies.

The HEA and the Department of Education's regulations define a change in
ownership resulting in a change in control to include the transfer of a
controlling interest of common stock of an institution or its parent
corporation. For a publicly-traded corporation, such as the Company will be
after completion of the Offering, Department of Education regulations specify
that a change in ownership and control arises when the Securities and Exchange
Commission requires the corporation to report the change in control by filing a
Form 8-K.

The HEA and Department of Education regulations allow a change in ownership
upon the retirement or death of an owner to be treated as not resulting in a
change of control if it involves the sale or transfer of the owner's ownership
interest to a family member or to a person with an ownership interest who has
been involved in the management of the institution for at least two years.
District of Columbia, Virginia and Maryland law and Middle States policies do
not specifically address changes in ownership resulting from the retirement or
death of an owner. However, it is possible that one or more of these regulatory
bodies would consider such a change in ownership to be a substantive change that
must be reported by the institution and would require review or reauthorization
of the institution. Ron K. Bailey currently owns all of the College's
outstanding stock jointly with his wife, and after completion of the Offering
will continue to own his shares of the Company's outstanding Common Stock
jointly with his wife. If Mr. Bailey were to die, his wife would become the sole
owner of those shares. Although under current law the death of one or both of
Mr. and Mrs. Bailey may not be considered a change in ownership resulting in a
change of control for Department of Education reporting purposes, it is possible
that such a transfer would require reporting to, or review or reauthorization
by, one or more state licensing agencies or Middle States.

Under INS regulations, if a school that is approved to admit foreign
students changes ownership, approval will be automatically withdrawn 60 days
after the change of ownership unless the school files a new petition for school
approval within 60 days of that change of ownership. If, after conducting a
review, the INS district director finds that the school's approval should not be
continued, the district director must institute proceedings to withdraw the
school's approval.

If the College underwent a change that required reapproval by any state
authority, Middle States or any federal agency, and any required regulatory
approval were significantly delayed, limited or denied, there could be a
material adverse effect on the College's ability to offer certain educational
programs, award certain degrees or diplomas, operate one or more of its
locations, admit certain students or participate in Title IV programs, which in
turn would materially adversely affect the College's operations. A change that
required approval by a state regulatory authority, Middle States or a federal
agency could also delay the College's ability to establish new campuses or
educational programs and may have other adverse regulatory effects. Furthermore,
the disadvantage of undergoing a change of control may materially limit the
College's flexibility in future financings or acquisition transactions.

42
<PAGE> 44

VETERANS BENEFITS

Pursuant to federal law providing benefits for veterans and reservists, the
College is approved for education of veterans and members of the selective
reserve and their dependents by the state approving agency in each state in
which the College currently operates. The College is authorized to offer
educational programs to veterans and other eligible persons in the District of
Columbia and Virginia. The College expects to seek approval to offer educational
programs to veterans and other eligible persons in Maryland at an appropriate
time.

43
<PAGE> 45

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the executive
officers, current director and persons nominated to become directors of the
Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ----------------------------------------------
<S> <C> <C>
Ron K. Bailey................................ 55 President, Treasurer and Director
Harry T. Wilkins............................. 39 Chief Financial Officer
Stanley G. Elmore............................ 55 Director Nominee
Todd A. Milano............................... 43 Director Nominee
Jennie D. Seaton............................. 66 Director Nominee
Roland Carey................................. 56 Director Nominee
Donald T. Benson............................. 53 Director Nominee
G. Thomas Waite, III......................... 45 Director Nominee
Donald Stoddard.............................. 59 Director Nominee
Charlotte Beason............................. 48 Director Nominee
</TABLE>

Ron K. Bailey is the President, Treasurer and a director of the Company.
Mr. Bailey has been the President and a trustee of the College since 1989 and
the President and a director of ELP since its formation in 1994. From 1980 to
1989, Mr. Bailey held a variety of administrative positions with the College,
including the position of Vice President of the College. Before assuming his
first full-time position with the College in 1980, Mr. Bailey was a part-time
faculty member of the College and served as Director of Data Processing of the
National Association of Home Builders.

Harry T. Wilkins is the Chief Financial Officer of the Company and has been
the Director of Financial Affairs of the College since 1992. Prior to joining
the College, Mr. Wilkins was a Director with the accounting firm of Wooden &
Benson, Chartered from 1984 to 1992 and a member of the consulting practice of
the accounting firm of Deloitte Touche (then Deloitte, Haskins and Sells) from
1979 to 1984. Mr. Wilkins is a Certified Public Accountant.

Stanley G. Elmore has been nominated and has agreed to serve as a director
of the Company upon the completion of the Offering. Mr. Elmore has been the
Chairman of the Board of Trustees of the College since 1989. Mr. Elmore has
served as Projects and Programs Manager, Citibank Mid-Atlantic, a position he
has held for more than five years.

Todd A. Milano has been nominated and has agreed to serve as a director of
the Company upon the completion of the Offering. Mr. Milano has been the Vice
Chairman of the Board of Trustees of the College since 1992. Mr. Milano has
served as President and Chief Executive Officer of Central Pennsylvania Business
School since 1989.

Dr. Jennie D. Seaton has been nominated and has agreed to serve as a
director of the Company upon the completion of the Offering. Dr. Seaton has been
a member of the Board of Trustees of the College since 1990. Dr. Seaton is
retired and was College Administrator of Virginia Commonwealth University from
1975 to 1994.

Roland Carey has been nominated and has agreed to serve as a director of
the Company upon the completion of the Offering. Mr. Carey has been a member of
the Board of Trustees of the College since 1990. Mr. Carey is an Instructor with
the Carl Sandburg School, a position he has held for more than five years.

Donald T. Benson has been nominated and has agreed to serve as a director
of the Company upon the completion of the Offering. Mr. Benson has been a member
of the Board of Trustees of the College since 1992. Mr. Benson has served as
Vice President, Human Resources, of Aetna Life Insurance Company since 1992.
From 1976 to 1992, Mr. Benson was Senior Vice President, Human Resources, of
Cigna Insurance Company.

44
<PAGE> 46

G. Thomas Waite, III has been nominated and has agreed to serve as a
director of the Company upon the completion of the Offering. Mr. Waite has been
a member of the Board of Trustees of the College since 1994. Mr. Waite has
served as Treasurer for the Humane Society of the United States since 1993. In
1992, Mr. Waite was the Director of Commercial Management of The National
Housing Partnership; from 1986 to 1991, he held the position of Senior Vice
President of Hurst Property Company. As a result of the insolvency of a real
estate partnership in which Mr. Waite served as a general partner, Mr. Waite
filed for protection from creditors under Chapter 11 of the Federal Bankruptcy
Code in 1993, which subsequently was converted to a Chapter 7 filing in 1993.

Dr. Donald Stoddard has been nominated and has agreed to serve as a
director of the Company upon the completion of the Offering. Dr. Stoddard has
been a member of the Board of Trustees of the College since 1995. Dr. Stoddard
is a Professor, Department of English, Anne Arundel Community College, a
position he has held since 1990. From 1979 to 1990, Dr. Stoddard was the
Coordinator, Collegiate Institutional Approval, of the Maryland Higher Education
Commission.

Dr. Charlotte Beason has been nominated and has agreed to serve as a
director of the Company upon the completion of the Offering. Dr. Beason has been
a member of the Board of Trustees of the College since 1995. Dr. Beason is an
Educational Consultant at the U.S. Department of Veterans Affairs/Health Care
Reform Office, a position she has held for more than five years.

Upon completion of the Offering, the director nominees shown in the table
above will begin service as directors of the Company, effective on that date.

Directors of the Company are elected at the annual meeting of stockholders
and serve until their successors are duly elected and qualified or until their
earlier resignation or removal. Executive officers serve at the discretion of
the Board of Directors.

CERTAIN SIGNIFICANT EMPLOYEES OF THE COLLEGE

The following information is supplied with respect to certain other
significant employees of the College:

Younes P. Benab, Ph.D., 59, is the Academic Dean of the College, a position
he has held since 1986.

J. Chris Toe, Ph.D., 41, is the Director, Graduate Programs of the College,
a position he has held since 1994. Dr. Toe joined the College in 1993 as an
adjunct professor, becoming a full-time professor in 1994. Prior to joining the
College, Dr. Toe was an independent consultant.

James F. McCoy, Jr., 37, is the Administrative Dean of the College, a
position he has held since 1994. Mr. McCoy previously was Finance Team Leader,
Phillips Colleges, in 1994; Vice President of Operations, Brenell Institute,
from 1992 to 1994; and Operations Manager, Phillips Colleges, from 1983 to 1992.

Marla Boulter, 41, is the College's Director of College Relations, a
position she has held since 1995. Ms. Boulter joined the College in 1990 as an
accountant and was the College's Director of Marketing from 1991 to 1995.

Don R. Anderson, 53, is the Director of Facilities of the College, a
position he has held since 1988.

Robert E. Farmer, 57, is the Director of Human Resources of the College, a
position he has held since 1995. Mr. Farmer was the Campus Coordinator of the
Arlington campus from 1992 until 1995, and was the Director of Admissions at
that campus from 1990 to 1992.

Piroj Piroolnuruk, 42, is the College's Director of Information Management,
a position he has held since 1992. Mr. Piroolnuruk was the College's coordinator
of Administrative Services from 1986 to 1992.

COMMITTEES OF THE BOARD OF DIRECTORS

Promptly following completion of the Offering, the Board of Directors will
establish an Audit Committee, an Executive Committee and a Compensation
Committee.

45
<PAGE> 47

Audit Committee. The Audit Committee will consist of non-management
directors and will make recommendations concerning the engagement of independent
public accountants, review with the independent public accountants the plans and
results of the audit engagement, approve professional services provided by the
independent public accountants and review the adequacy of the Company's internal
accounting controls.

Executive Committee. The Executive Committee will consist of Mr. Bailey
and one or more non-management directors and will exercise such authority as is
delegated to it.

Compensation Committee. The Compensation Committee will consist of Mr.
Bailey and two non-management directors. The Compensation Committee will
determine the compensation of the Company's executive officers, subject to the
provisions of any employment agreements, and will administer the Company's 1996
Stock Option Plan. Mr. Bailey intends to abstain from participating in any
actions of the Compensation Committee affecting his compensation.

COMPENSATION OF THE BOARD OF DIRECTORS

Directors are reimbursed for expenses incurred in connection with their
attendance at Board and Committee meetings, but currently receive no
compensation for serving as directors.

EXECUTIVE COMPENSATION

The following table sets forth the compensation for the last completed
fiscal year paid to the College's Chief Executive Officer. No other executive
officer of the College received salary and bonus exceeding $100,000 in that
fiscal year.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
FISCAL ---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2)
----------------------------------------- ------ -------- ---------- ---------------
<S> <C> <C> <C> <C>
Ron K. Bailey, President................. 1995 $150,000 $6,175,000 $ 3,181
</TABLE>

- ---------------
(1) The bonus was withheld for payments by Mr. Bailey in respect of income taxes
on undistributed S Corporation income. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Background and
Overview." Other compensation in the form of perquisites and other personal
benefits has been omitted because the aggregate amount of such perquisites
and other personal benefits constituted less than $50,000 or 10% of Mr.
Bailey's total annual salary and bonus.

(2) Reflects (i) $3,043 in matching contributions made by the College to the
College's 401(k) plan for Mr. Bailey and (ii) $138 in premiums paid by the
College for life insurance for Mr. Bailey.

No stock options were granted during the year ended December 31, 1995.

EXECUTIVE EMPLOYMENT AGREEMENTS

Mr. Bailey and the College have entered into an Employment Agreement,
effective as of the Offering closing date, which provides that Mr. Bailey will
serve as President and Chief Executive Officer of the College. For his services,
Mr. Bailey will receive an initial annual salary of $150,000. According to the
terms of the Employment Agreement, Mr. Bailey's salary for successive years may
be increased at the discretion of the College's Board of Trustees. The College
does not currently contemplate payment of bonuses to Mr. Bailey. Future bonuses,
if any, paid to Mr. Bailey will be awarded pursuant to guidelines approved by
the Compensation Committee of the Company's Board of Directors and will be at
levels commensurate with any bonuses paid to other executive officers. The
Employment Agreement provides that in the event that Mr. Bailey's employment is
terminated by the Board of Trustees, Mr. Bailey will be entitled to severance
benefits equal to the amount of his most recent annual salary. The agreement
contains a covenant restricting Mr. Bailey from competing with the College for
three years after the termination of employment.

46
<PAGE> 48

The College also has entered into an employment agreement with Mr. Harry T.
Wilkins, Chief Financial Officer of the Company, effective as of the Offering
closing date, which provides for a severance payment equal to one year's salary
if Mr. Wilkins is terminated other than for cause (as defined in the agreement).
The employment agreement also contains a covenant restricting Mr. Wilkins from
competing with the College for three years after the termination of his
employment.

STOCK OPTION PLAN

The Company's 1996 Stock Option Plan (the "Plan") provides for the grant of
options that are intended to qualify as "incentive stock options" under Section
422 of the Internal Revenue Code of 1986, and for grant of non-qualifying
options to directors and employees of the Company. The Plan authorizes the
issuance of up to 1,000,000 Shares pursuant to options granted under the Plan
(subject to anti-dilution adjustments in the event of a stock split,
recapitalization or similar transaction). The Compensation Committee of the
Board of Directors will administer the Plan and will grant options to purchase
Shares.

It is anticipated that options to purchase 700,000 Shares at the initial
public offering price will be granted to employees eligible to participate in
the 401(k) Plan and for all Directors, except for Mr. Bailey, who will not
receive any options under the initial grant. Harry T. Wilkins, the Company's
Chief Financial Officer, will receive options to acquire 200,000 Shares under
the initial grant. All such options will be exercisable at a price equal to the
initial public offering price. Options granted will vest with respect to
one-third of the Shares subject to the option on each of the first, second and
third anniversaries of the date of grant. The options will expire on the fifth
anniversary of the date of grant.

The option exercise price for incentive stock options granted under the
Plan may not be less than 100% of the fair market value of the Shares on the
date of grant of the option (or 110% in the case of an incentive stock option
granted to an optionee beneficially owning more than 10% of the outstanding
Shares). The option exercise price for non-incentive stock options granted under
the Plan may not be less than 100% of the fair market value of the Shares on the
date of grant of the option. The maximum option term is ten years (or five years
in the case of an incentive stock option granted to an optionee beneficially
owning more than 10% of the outstanding Shares). Options may be exercised at any
time after grant, except as otherwise provided in the particular option
agreement. Options covering no more than 500,000 Shares may be granted to any
officer or other employee during the term of the Plan. There is also a $100,000
limit on the value of Shares (determined at the time of grant) covered by
incentive stock options that first become exercisable by an optionee in any
calendar year.

Options granted under the Plan are not transferable and may be exercised
only by the optionee during his or her lifetime. If any optionee's employment
with the Company terminates by reason of death or permanent and total
disability, the optionee's options, whether or not then exercisable, may be
exercised within one year after such death or disability unless otherwise
provided in the option agreement (but not later than the date the option would
otherwise expire). If the optionee's employment terminates for any reason other
than death or disability, options held by such optionee terminate upon such
termination unless otherwise provided in the option agreement or approved by the
Compensation Committee (but not later than the date the option would otherwise
expire). The Compensation Committee may extend the period during which the
option may be exercised (but not later than the date the option would otherwise
expire) by so providing in the option agreement. The options will terminate
within a specified time after the optionee's termination of employment with the
Company.

The Plan provides for formula grants of options to non-employee directors
(an "Eligible Director"). Each Eligible Director at the time of the initial
public offering will be granted an initial option to purchase a number of shares
of Common Stock equal to 1,000 times the number of years the Eligible Director
has served as a director of the Company. Each Eligible Director will also be
granted an additional option to purchase 1,000 shares of Common Stock
immediately after each of the subsequent annual meetings of the Company's
stockholders if the Eligible Director continues to be an Eligible Director.
Options granted to Eligible Directors under the Plan may be exercised with
respect to the shares subject to such option one year after the option is
granted. All options expire five years after the date of grant.

47
<PAGE> 49

Upon any dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation in which the Company is not the
surviving corporation, or upon the sale of all or substantially all of the
assets of the Company to another corporation, or upon any transaction approved
by the Board of Directors which results in any person or entity owning 80% or
more of the total combined voting power of all classes of stock of the Company,
the Plan and the options issued thereunder will terminate, unless provision is
made in connection with such transaction for the continuation of the Plan and/or
the assumption of the options or for the substitution for such options of new
options covering the stock of a successor corporation or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of Shares and
the per Share exercise price. In the event of such termination, all outstanding
options will be exercisable in full during such period immediately prior to the
occurrence of such termination as the Board of Directors in its discretion will
determine.

The Board of Directors may amend the Plan with respect to Shares as to
which options have not been granted. However, the Company's stockholders must
approve any amendment that would: (i) change the requirements as to eligibility
to receive options; (ii) materially increase the benefits accruing to
participants under the Plan; or (iii) materially increase the number of Shares
that may be sold pursuant to options granted under the Plan (except for
adjustments upon changes in capitalization).

401(k) PLAN

The College maintains a retirement plan (the "401(k) Plan") intended to
qualify under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986.
The 401(k) Plan is a defined contribution plan that covers all full-time
employees of the College of at least 21 years of age, employed by the College
for at least one year. Employees may contribute up to 10% of their annual wages
(subject to an annual limit prescribed by the Code) as pretax, salary deferral
contributions. The College may, in its discretion, match employee contributions
up to a maximum of 15% of annual wages. The College's contributions to the
401(k) Plan for the year ended December 31, 1995 and the three months ended
March 31, 1996 were $94,000 and $0, respectively. As of March 31, 1996, 147 of
the College's current employees were participants in the 401(k) Plan.

CERTAIN TRANSACTIONS

LEASE OF CAMPUS FACILITIES

The College currently leases the facilities of five of its eight campuses
from corporations of which Ron K. Bailey, President and a director of the
Company, is the sole stockholder, a director and an executive officer. The
College from time to time has made distributions to the Current Stockholders in
amounts sufficient to provide the equity necessary for campus acquisitions by
Mr. Bailey. See "Dividend Policy." Such distributions totaled $2.0 million in
1993, $2.8 million in 1994, $3.4 million in 1995 and $650,000 in the three
months ended March 31, 1996. Prior to the Offering, Mr. Bailey pursued a
strategy of purchasing campus facilities in order to avoid the incurrence of
debt by the College. Generally, Mr. Bailey obtained mortgage financing for
acquisition of the facilities and the College entered into long-term leases
obligating it to make monthly rent payments approximately equal to the mortgage
payments and other property-specific expenses. Each lease provided that the
College would have the right to purchase the applicable campus, at the fair
value of such facility as determined by an independent appraisal, in the event
of Mr. Bailey's death. In contemplation of the Offering, and effective as of the
Offering closing date, the parties amended the terms of the leases to reflect
current market conditions. Management believes these terms are at least as
favorable to the College as the

48
<PAGE> 50

College could obtain from unaffiliated parties. The following table sets forth
certain information regarding the leases as amended.

<TABLE>
<CAPTION>
GROSS ANNUAL
LEASABLE BASE
CAMPUS LANDLORD AREA(1) RENT(2)
----------------------------------- --------------------------------- -------- --------
<S> <C> <C> <C>
Fredericksburg..................... Fredericksburg Investments, Inc. 17,500 $297,840
Manassas........................... Battleview Investments, Inc. 20,800 353,600
Takoma Park........................ Beacon Investments, Inc. 21,800 370,900
Washington, D.C. .................. Central Investments, Inc. 30,000 750,000
Woodbridge......................... Potomac Investments, Inc. 20,800 353,600
</TABLE>

- ---------------
(1) Square feet.

(2) Subject to annual adjustment based on increases in the Consumer Price Index.

Each of the foregoing leases as amended has a ten-year term expiring in
2006, with three five-year renewal terms. The College has the option under each
lease to purchase the related campus facility at any time during the term of the
lease at the fair market value of such facility as determined by an independent
appraiser. No proceeds of the Offering will be used to purchase any such campus
facility.

The following table sets forth information regarding total annual payments
by the College under the foregoing leases during the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
------------------------------------ ENDED
CAMPUS 1993 1994 1995 MARCH 31, 1996
-------------------------------------- -------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Fredericksburg........................ $336,000 $ 420,000 $ 474,000 $118,000
Manassas.............................. -- 49,000 396,000 99,000
Takoma Park........................... 160,000 240,000 240,000 60,000
Washington, D.C. ..................... -- 310,000 744,000 187,000
Woodbridge............................ -- -- 42,000 126,000
-------- ---------- ---------- -----------
Total....................... $496,000 $1,019,000 $1,896,000 $590,000
======== ========= ========= ===========
</TABLE>

Prior to entering into its current lease for the Washington, D.C. campus,
the College leased that facility from 817 Fourteenth Street Associates Limited
Partnership. Mr. Bailey owned a 10% limited partnership interest in such entity.
The College made lease payments to such entity of $550,000 and $320,000 in 1993
and 1994, respectively.

The College may lease additional campus facilities from entities owned or
controlled by Mr. Bailey. Any such leases will have market terms based on an
independent appraisal and will be subject to approval by a majority of the
Company's independent directors.

TRANSACTIONS WITH ELP

Educational loans under the SEL Program are purchased from the College and
serviced by ELP. See "Business -- SEL Program." Ron K. Bailey, President and a
director of the Company, has been the sole stockholder, a director and an
executive officer of ELP. In the year ended December 31, 1995 and the three
months ended March 31, 1996, ELP purchased loans from the College at a discount
(reflecting ELP's future loan servicing costs) to their carrying amounts of
approximately $1.4 million and $650,000, respectively. The College provided ELP
office space on a rent-free basis in 1995 and the three months ended March 31,
1996. Upon completion of the Offering, ELP will become a wholly-owned subsidiary
of the Company.

ELP carries its loan receivables at the stated amount of unpaid principal,
reduced by unamortized purchase discount and an allowance for loan losses. The
allowance, which approximated $80,000 as of March 31, 1996, is an amount that
management believes will be adequate to absorb probable losses on existing loans
that may become uncollectible, based on evaluation of the existing loan
portfolio and prior experience.

49
<PAGE> 51

The evaluation takes into account such factors as changes in nature and volume
of the portfolio, overall portfolio quality, review of specific problem
receivables, and current economic conditions that may affect the borrowers'
ability to pay. ELP has not incurred significant losses from uncollectible loans
receivable since it commenced operations.

At March 31, 1996, the outstanding principal amount of student loans
receivable was $1.6 million.

A portion of the distributions made by the College to the Current
Stockholders has been applied to fund ELP's operations. See "Dividend Policy."
In March 1996, ELP paid Mr. Bailey $958,000 as a return of capital previously
contributed by Mr. Bailey to fund ELP's purchase of loans under the SEL Program.
This amount was not required by ELP because the volume of loan originations
under the SEL Program was less than the College originally had budgeted.

In 1995, ELP made automobile loans to Mr. Bailey and his two children
totalling $28,000. The loans bore interest at an annual rate of 7.5%. In the
three months ended March 31, 1996, ELP sold the loans to an unrelated third
party at a discount.

TRANSACTIONS WITH PRK INVESTMENTS, INC.

The College retained PRK Investments, Inc. ("PRK") to provide it with a
variety of services, including services related to computer equipment purchasing
and the College's compliance with the HEA and Department of Education
regulations applicable to Title IV Programs. See "Licensing, Accreditation and
Financial Aid Regulation -- Financial Aid Regulation -- Administrative
Capacity." Two-thirds of the PRK common stock is owned by children of Ron K.
Bailey, President and a director of the Company. The College paid PRK
approximately $70,000 and $94,000 for computer equipment purchasing and related
services in 1995 and the three months ended March 31, 1996, respectively. In
addition, pursuant to a contract with PRK, the College made monthly payments of
$20,000 to PRK for Title IV services from January 1, 1996 through May 15, 1996.
Beginning May 16, 1996, the computer equipment purchasing and related services
performed by PRK for the College are performed by employees of ELP, and the
College entered into a contract with ELP for the provision of Title IV services
for a monthly fee of approximately $28,000. The College provided PRK office
space on a rent-free basis in 1995 and the three months ended March 31, 1996.

TRANSACTIONS WITH CAREER TRAINING INSTITUTE, INC.

College faculty and other employees have received computer-related
instruction and training in other occupational skills from Career Training
Institute, Inc. ("CTI"). Eighty percent of the CTI common stock is owned by
children of Ron K. Bailey, President and a director of the Company. The College
paid CTI approximately $8,000, $75,000 and $17,000 for its services in 1994,
1995 and the three months ended March 31, 1996, respectively. Management
believes that CTI has provided such services to the College on terms at least as
favorable to the College as the College could obtain from unaffiliated parties.
The Company believes that the instruction provided by CTI is not competitive
with the current programs of the College.

ELP purchased loans from CTI totalling approximately $76,000 and
approximately $110,000 in 1995 and the three months ended March 31, 1996,
respectively.

REORGANIZATION TRANSACTIONS

In connection with the Offering, the Company will effect the Reorganization
pursuant to which, among other things, the Company will acquire the College and
ELP. See "Reorganization" and "Use of Proceeds."

Prior to completion of the Offering, the Company will enter into a Tax
Indemnification Agreement with the Current Stockholders in consideration of
their consent to the termination of the College's election to be treated as an S
Corporation and to the use of the closing of the books method. See
"Reorganization -- Termination of S Corporation Status." Pursuant to the Tax
Indemnification Agreement, the Company will agree to make additional payments to
the Current Stockholders equal to any amount by which the actual taxable income
allocable to the Current Stockholders for the 1996 S Corporation period (as
determined for federal income tax purposes) exceeds the amount previously
estimated to be allocable to the

50
<PAGE> 52

Current Stockholders for such period (and the Current Stockholders will agree to
reimburse the Company if they receive payments in excess of such actual taxable
income). Management does not believe any payments which would likely be made
under the Tax Indemnification Agreement would have a material effect on the
Company's financial condition.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock prior to and upon completion of the Offering of each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock. Except as set forth below, no director, director
nominee or executive officer of the Company beneficially owns any of the
outstanding Common Stock.

<TABLE>
<CAPTION>
PERCENT OF CLASS
AMOUNT OF --------------------
NAME OF BENEFICIAL BEFORE AFTER
BENEFICIAL OWNERS OWNERSHIP OFFERING OFFERING
--------------------------------------------------------- ---------- -------- --------
<S> <C> <C> <C>
Ron K. Bailey and Beverly W. Bailey(1)................... 6,000,000 100% 66.7%
</TABLE>

- ---------------
(1) Prior to the Reorganization, which will be consummated upon completion of
the Offering, Mr. and Mrs. Bailey owned 100% (1,000 shares) of the Common
Stock, as joint tenants with a right of survivorship. In connection with
the Reorganization, Mr. and Mrs. Bailey will acquire 5,999,000 shares of
Common Stock in exchange for 100% of the outstanding capital stock of the
College. See "Reorganization -- Formation of Holding Company."

51
<PAGE> 53

DESCRIPTION OF CAPITAL STOCK

The Company's Certificate of Incorporation (the "Charter") authorizes the
Company to issue 20,000,000 shares of Common Stock, $.01 par value, and
5,000,000 shares of Preferred Stock, $.01 par value. On the date of this
Prospectus, the Company has 1,000 shares of Common Stock and no shares of
Preferred Stock outstanding. Upon completion of the Offering and the
Reorganization, there will be 9,000,000 shares of Common Stock outstanding,
including an additional 5,999,000 Shares issued to the Current Stockholders,
plus options to acquire up to 700,000 Shares.

COMMON STOCK

Each holder of Common Stock is entitled to one vote per share on all
matters to be voted upon by the stockholders. Stockholders do not have
cumulative voting rights in the election of directors. Subject to preferences
that may be applicable to any outstanding Preferred Stock, the holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board of Directors out of funds legally available
therefor. The Company presently intends to pay regular cash dividends on its
Common Stock. See "Dividend Policy." In the event of a liquidation, dissolution
or winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock, if any, then outstanding. The Common
Stock has no preemptive or conversion rights or other subscription rights. All
outstanding shares of Common Stock are, and the Shares of Common Stock offered
hereby will be, when issued and paid for, duly authorized, validly issued, fully
paid and non-assessable. As of the date of this Prospectus, the Current
Stockholders hold all of the outstanding Common Stock.

PREFERRED STOCK

The Company is authorized to issue 5,000,000 shares of undesignated
Preferred Stock. The Board of Directors has the authority to issue the
undesignated Preferred Stock from time to time in one or more series and to
establish the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued shares of undesignated Preferred Stock and to
fix the number of shares constituting any series and the designation of such
series, without any further vote or action by the stockholders. Any future
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of the holders
of Common Stock. At present, the Company has no plans to issue any Preferred
Stock.

CERTAIN CHARTER AND BYLAW PROVISIONS

Stockholders' rights and related matters are governed by Maryland law, the
Company's Charter and its bylaws. Certain provisions of the Charter and bylaws
of the Company, which are summarized below, may make it more difficult to change
the composition of the Company's Board of Directors and may discourage or make
more difficult any attempt by a person or group to obtain control of the
Company.

Voting Requirements. The Company's Charter may not be amended without the
affirmative vote of a majority of the shares entitled to vote generally in the
election of directors, voting as a single voting group. The Company's bylaws may
be amended either by the affirmative vote of a majority of all shares
outstanding and entitled to vote generally in the election of directors, voting
as a single group, or by an affirmative vote of a majority of the Company's
directors then holding office, unless the stockholders prescribe that any such
bylaw may not be amended or repealed by the Board of Directors.

Special Meetings. Under the Company's bylaws, special meetings of the
stockholders may be called by stockholders only if such stockholders hold
outstanding shares representing at least 25% of all votes entitled to be cast on
any issue proposed to be considered at any such special meeting.

52
<PAGE> 54

LIMITATION OF LIABILITY

Under Maryland law a corporation formed in Maryland is permitted to limit,
by provision in its charter, the liability of directors and officers so that no
director or officer of the Company shall be liable to the Company or to any
stockholder for money damages except to the extent that (i) the director or
officer actually received an improper benefit in money, property or services,
for the amount of the benefit or profit in money, property or services actually
received, or (ii) a judgment or other final adjudication adverse to the director
or officer is entered in a proceeding based on a finding in a proceeding that
the director's or officer's action was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding. The Company's Charter has incorporated the provisions of this law
limiting the liability of directors and officers.

The Company's bylaws require it to indemnify (a) any present or former
director or officer who has been successful, on the merits or otherwise, in the
defense of a proceeding to which he was made a party by reason of his service in
that capacity, against reasonable expenses incurred by him in connection with
the proceeding and (b) any present or former director or officer against any
claim or liability unless it is established that (i) his act or omission was
committed in bad faith or was the result of active or deliberate dishonesty,
(ii) he actually received an improper personal benefit in money, property or
services or (iii) in the case of a criminal proceeding, he had reasonable cause
to believe that his act or omission was unlawful. In addition, the Company's
bylaws require it to pay or reimburse, in advance of final disposition of a
proceeding, reasonable expenses incurred by a present or former director or
officer made a party to a proceeding by reason of his service as a director or
officer provided that the Company shall have received (1) a written affirmation
by the director or officer of his good faith belief that he has met the standard
of conduct necessary for indemnification by the Company as authorized by the
bylaws and (2) a written understanding by or on his behalf to repay the amount
paid or reimbursed by the Company if it shall ultimately be determined that the
standard of conduct was not met. The Company's bylaws also (i) provide that any
indemnification or payment or reimbursement of the expenses permitted by the
bylaws shall be furnished in accordance with the procedures provided for
indemnification and payment of expenses under Section 2-418 of the Maryland
General Corporation Law for directors of Maryland corporations and (ii) permit
the Company such other and further indemnification or payment or reimbursement
of expenses as may be permitted under Section 2-418 of the Maryland General
Corporation Law for directors of Maryland corporations.

CORPORATE ANTI-TAKEOVER PROVISIONS

The Company has elected to include in its Charter provisions exempting it
from the application of the Maryland business combination statute and control
share acquisition statute.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American
Securities Transfer, Incorporated.

53
<PAGE> 55

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no market for the Common Stock. Sales
of substantial amounts of Common Stock in the public market after the Offering
could adversely affect the market price of the Common Stock.

Upon completion of the Offering, the Company will have 9,000,000 shares of
Common Stock outstanding (9,450,000 if the Underwriters' over-allotment option
is exercised in full), excluding 700,000 shares issuable upon exercise of
options held by employees of the Company. Of these shares, the 3,000,000 shares
of Common Stock offered hereby will be freely transferable without restriction
or further registration under the Securities Act, unless purchased by
"affiliates" of the College as that term is defined in Rule 144 under the
Securities Act. All the remaining shares of Common Stock, consisting of the
6,000,000 shares which will be held by the Current Stockholders upon completion
of the Offering, are "restricted securities" within the meaning of Rule 144. The
Company and the Current Stockholders have agreed with Legg Mason Wood Walker,
Incorporated, the Representative of the Underwriters, not to sell or otherwise
dispose of any shares of Common Stock, or any securities convertible into or
exercisable or exchangeable for shares of Common Stock (subject, in the case of
the Company, to an exception for the grant of options under the Company's stock
option plan), for a period of 180 days after the date of this Prospectus without
the consent of the Representative. With the consent of the Representative, such
shares may be sold before expiration of the 180-day period without prior notice
to the Company's other stockholders or to any public market in which the Common
Stock trades. Commencing 90 days after the date of this Prospectus, and subject
to such consent, all but 1,000 of the 6,000,000 shares owned by the Current
Stockholders will be immediately eligible for sale in the public market subject
to compliance with the volume and other restrictions of Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons deemed to be affiliates of the
Company, who has beneficially owned shares for at least a two-year period (as
computed under Rule 144) is entitled to sell within any three-month period
commencing 90 days from the date of this Prospectus a number of shares that does
not exceed the greater of (i) 1% of the then outstanding Common Stock (90,000
shares after giving effect to the Offering) or (ii) the average weekly trading
volume in the Common Stock during the four calendar weeks preceding filing of
notice of such sale, and may only sell such shares through unsolicited brokers'
transactions or transactions with a market maker. Sales under Rule 144 are also
subject to certain requirements as to the manner of sale, notice and the
availability of current public information about the Company. However, a person
who is not an affiliate of the issuer for at least 90 days and who has
beneficially owned such shares for at least three years is entitled under Rule
144(k) to sell such shares without regard to the volume or other resale
requirements described above. In addition, Rule 144A under the Securities Act
permits, subject to certain conditions, the sale by the current holders of
restricted securities of all or a portion of their shares to certain "qualified
institutional buyers" as defined in Rule 144A.

The Company is unable to estimate the number of shares of Common Stock that
will be sold under Rule 144 or otherwise because this will depend in part on the
market price for the Common Stock, the personal circumstances of the sellers and
other factors.

54
<PAGE> 56

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, a copy
of which has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part, the Underwriters named below have agreed, severally
and not jointly, through Legg Mason Wood Walker, Incorporated, the
Representative of the Underwriters, to purchase from the Company, and the
Company has agreed to sell to the Underwriters, the numbers of Shares set forth
opposite the name of the respective Underwriter at the Price to Public less the
Underwriting Discount set forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
--------------------------------------------------------------- ------------
<S> <C>
Legg Mason Wood Walker, Incorporated...........................
------------
Total.....................................................
==========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the Shares offered hereby if any of the Shares
are purchased.

The Underwriters have advised the Company that they propose to offer all or
a part of the Shares offered hereby directly to the public at the Price to
Public set forth on the cover page of this Prospectus, that they may offer
Shares to certain dealers at a price which represents a concession of per
Share, and that they may allow, and such dealers may reallow, a concession of
not more than per Share to certain other dealers. After the commencement
of the Offering, the Price to Public and the concessions may be changed.

The Company has granted the Underwriters a 30-day option to purchase up to
450,000 additional number of Shares at the Price to Public less the Underwriting
Discount set forth on the cover page of this Prospectus. The Underwriters may
exercise the option only to cover over-allotments, if any, in connection with
the offering of the Shares made hereby. To the extent the Underwriters exercise
the option, each of the Underwriters will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage of additional
Shares of Common Stock as the number of Shares set forth opposite that
Underwriter's name in the preceding table bears to the total number of Shares
listed in such table.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.

The Current Stockholders and the Company each have agreed with the
Representative of the Underwriters not to sell or otherwise dispose of any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for shares of Common Stock (subject, in the case of the Company, to
an exception for the grant of options under the Company's stock option plan),
for a period of 180 days after the date of this Prospectus without the written
consent of the Representative. See "Shares Eligible for Future Sale."

The Representative of the Underwriters has advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation between the Company and the Representative of the Underwriters.
Among the factors to be considered in such negotiations are prevailing market
conditions, the results of operations of the Company in recent periods, the
market capitalizations and stages of

55
<PAGE> 57

development of other companies which the Company and the Representative of the
Underwriters believe to be comparable to the Company, estimates of the business
potential of the Company, the present state of the Company's development and
other factors deemed relevant. The anticipated initial public offering price set
forth on the cover of this Prospectus is subject to change as a result of market
conditions and other factors.

Legg Mason Wood Walker, Incorporated may perform financial services for the
Company or the College from time to time.

LEGAL MATTERS

The legal validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Hogan & Hartson L.L.P., Baltimore, Maryland.
Certain legal matters will be passed upon for the Underwriters by Shaw, Pittman,
Potts & Trowbridge (a partnership including professional corporations),
Washington, D.C.

EXPERTS

The balance sheet of Strayer Education, Inc. as of May 15, 1996, and the
combined balance sheets of Strayer College, Inc. and Affiliate as of December
31, 1995 and 1994, and the related combined statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995, included in this Prospectus have been included herein in reliance upon
the reports of Coopers & Lybrand L.L.P., independent public accountants, given
upon the authority of that firm as experts in accounting and auditing. The
report for Strayer College, Inc. and Affiliate includes an explanatory paragraph
relating to the restatement of certain payments to the Current Stockholders.

ADDITIONAL INFORMATION

A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered hereby has been filed by the Company with
the Securities and Exchange Commission (the "Commission"). This Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain parts of which are omitted pursuant to
the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. For further information with respect to the Company and the Common
Stock offered hereby, reference is hereby made to the Registration Statement and
the exhibits and schedules thereto. A copy of the Registration Statement may be
inspected by anyone without charge and may be obtained at prescribed rates at
the Commission at the Public Reference Section of the Commission, maintained by
the Commission at its principal office located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, the Northeast Regional Office located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and the Midwest Regional
Office located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
The Commission also maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants such as the Company that file electronically with the Commission.

56
<PAGE> 58

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STRAYER EDUCATION, INC.
Report of Independent Accountants.................................................. F- 2
Balance Sheet as of May 15, 1996................................................... F- 3
Notes to Financial Statement....................................................... F- 4
STRAYER COLLEGE, INC. AND AFFILIATE
Report of Independent Accountants.................................................. F- 5
Combined Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996
(unaudited)..................................................................... F- 6
Combined Statements of Income for each of the three years in the period ended
December 31, 1995 and for the three months ended March 31, 1995 and 1996
(unaudited)..................................................................... F- 7
Combined Statements of Stockholders' Equity for each of the three years in the
period ended December 31, 1995 and for the three months ended March 31, 1996
(unaudited)..................................................................... F- 8
Combined Statements of Cash Flows for each of the three years in the period ended
December 31, 1995 and for the three months ended March 31, 1995 and 1996
(unaudited)..................................................................... F- 9
Notes to Combined Financial Statements............................................. F-10
</TABLE>

F-1
<PAGE> 59

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
Strayer Education, Inc.

We have audited the accompanying balance sheet of Strayer Education, Inc.
as of May 15, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Strayer Education, Inc. as
of May 15, 1996, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Washington, D.C.
May 15, 1996

F-2
<PAGE> 60

STRAYER EDUCATION, INC.
BALANCE SHEET
MAY 15, 1996

<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $1,000
------
Total Assets.............................................................. $1,000
======
STOCKHOLDERS' EQUITY
Stockholders' Equity:
Preferred stock, 5,000,000 shares authorized; no shares issued or outstanding..... $ --
Common stock, par value $.01, 20,000,000 shares authorized; 1,000 shares issued
and outstanding................................................................ 10
Additional paid-in capital.......................................................... 990
------
Total stockholders' equity................................................ $1,000
======
</TABLE>

The accompanying notes are an integral part of this statement.

F-3
<PAGE> 61

STRAYER EDUCATION, INC.
NOTES TO FINANCIAL STATEMENT
MAY 15, 1996

1. ORGANIZATION

Strayer Education, Inc. (Company) was formed on May 10, 1996, as a Maryland
corporation, and was capitalized on May 15, 1996 with cash of $1,000. The
Company has not yet commenced operations.

2. INITIAL PUBLIC OFFERING AND PENDING ACQUISITION

The Company is currently undertaking an initial public offering of its
common stock. Pursuant to the offering, the Company will offer 3,000,000 shares
of its common stock for sale to the public. Prior to the closing of the
offering, the Company will exchange 5,999,000 shares of its common stock for
100% of the outstanding common stock of Strayer College, Inc. (the College). The
College is a proprietary accredited institution of higher education that
provides undergraduate and graduate degrees in various fields of study through
its eight campuses in the District of Columbia and Virginia. The Company will
set aside an additional 1,000,000 shares of common stock for the establishment
of a stock option plan.

3. SUBSEQUENT EVENT

Contemporaneously with the closing of the initial public offering, the
Company intends to acquire Education Loan Processing Inc. (ELP) at a purchase
price equal to ELP's net book value ($1,200,000 as of March 31, 1996) at the
date of acquisition. ELP is wholly owned by a stockholder of the Company and was
established to purchase and service student loans from the College. Under
generally accepted accounting principles, ELP's basis in its assets and
liabilities will be carried over to the Company and the operations of ELP and
the Company will be retroactively combined in a manner similar to a pooling of
interests, because this acquisition is a combination of entities under common
control.

F-4
<PAGE> 62

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Stockholders
Strayer College, Inc.

We have audited the accompanying combined balance sheets of Strayer
College, Inc. and Affiliate as of December 31, 1994 and 1995, and the related
combined statements of income, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1995. These combined financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Strayer
College, Inc. and Affiliate as of December 31, 1994 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

As discussed in Note 12 to the combined financial statements, the
accompanying combined statements of income, stockholders' equity and cash flows
for the years ended December 31, 1993 and 1994 have been restated.

COOPERS & LYBRAND L.L.P.

Washington, D.C.
May 14, 1996

F-5
<PAGE> 63

STRAYER COLLEGE, INC. AND AFFILIATE
COMBINED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------ MARCH 31, MARCH 31,
1994 1995 1996 1996
------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED
NOTE 3)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 5,564 $ 8,992 $11,905 $ 9,806
Investments in marketable securities available for
sale, at market................................ 898 1,742 725 725
Short-term investments -- restricted.............. 403 720 778 778
Tuition receivable, net of allowances for doubtful
accounts of $135, $155, $189 and $189,
respectively................................... 8,813 7,873 7,861 7,861
Inventories....................................... 546 725 718 718
Other current assets.............................. 197 58 -- --
------ ------ ------ ------
Total current assets...................... 16,421 20,110 21,987 19,888
Student loans receivable, net of allowances for
losses......................................... -- 932 1,190 1,190
Property and equipment, net....................... 2,400 2,874 2,867 2,867
Investments in marketable securities available for
sale, at market................................ 925 1,890 3,491 3,491
Other assets...................................... 78 72 72 72
------ ------ ------ ------
Total assets.............................. $19,824 $25,878 $29,607 $27,508
====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable............................ $ 580 $ 360 $ 603 $ 603
Accrued expenses.................................. 458 542 710 710
Unearned tuition.................................. 9,391 9,504 9,423 9,423
Other current liabilities......................... 58 133 307 307
Distribution payable to stockholders.............. -- -- -- 14,042
------ ------ ------ ------
Total current liabilities................. 10,487 10,539 11,043 25,085
------ ------ ------ ------
Commitments and contingencies
Stockholders' Equity:
Common stock...................................... 4 4 4 60
Additional paid-in capital........................ -- 2,100 1,142 1,142
Retained earnings................................. 9,376 13,077 17,163 966
Net unrealized (losses) gains on investments...... (43) 158 255 255
------ ------ ------ ------
Total stockholders' equity................ 9,337 15,339 18,564 2,423
------ ------ ------ ------
Total liabilities and stockholders'
equity.................................. $19,824 $25,878 $29,607 $27,508
====== ====== ====== ======
</TABLE>

The accompanying notes to these combined financial statements
are an integral part of these combined statements.

F-6
<PAGE> 64

STRAYER COLLEGE, INC. AND AFFILIATE
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes to these combined financial statements
are an integral part of these combined statements.

F-7
<PAGE> 65

STRAYER COLLEGE, INC. AND AFFILIATE
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ELP ADDITIONAL COLLEGE UNREALIZED
COMMON STOCK PAID-IN COMMON STOCK GAINS
--------------- CAPITAL --------------- RETAINED (LOSSES) ON
SHARES AMOUNT OF ELP, INC. SHARES AMOUNT EARNINGS INVESTMENTS TOTAL
------ ------ ------------ ------ ------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992..... -- $-- $-- 375.5 $4 $ 4,246 $ -- $ 4,250
Distributions to
stockholders............... -- -- -- -- -- (2,046) -- (2,046)
Net income................... -- -- -- -- -- 4,424 -- 4,424
--
------ ------ ------------ ------ -------- ----- -----------
Balance, December 31, 1993..... -- -- -- 375.5 4 6,624 -- 6,628
Distributions to
stockholders............... -- -- -- -- -- (2,800) -- (2,800)
Net unrealized losses on
investments................ -- -- -- -- -- -- (43) (43)
Net income................... -- -- -- -- -- 5,552 -- 5,552
--
------ ------ ------------ ------ -------- ----- -----------
Balance, December 31, 1994..... -- -- -- 375.5 4 9,376 (43) 9,337
Distributions to
stockholders............... -- -- -- -- -- (3,350) -- (3,350)
Issuance of common stock and
additional capital
contributions by ELP
stockholder................ 100 -- 2,100 -- -- -- -- 2,100
Net unrealized gains on
investments................ -- -- -- -- -- -- 201 201
Net income................... -- -- -- -- -- 7,051 -- 7,051
--
------ ------ ------------ ------ -------- ----- -----------
Balance, December 31, 1995..... 100 -- 2,100 375.5 4 13,077 158 15,339
Distributions to
stockholders............... -- -- (958) -- -- (650) -- (1,608)
Net unrealized gains on
investments................ -- -- -- -- -- -- 97 97
Net income................... -- -- -- -- -- 4,736 -- 4,736
--
------ ------ ------------ ------ -------- ----- -----------
Balance, March 31, 1996
(unaudited).................. 100 $-- $1,142 375.5 $4 $17,163 $ 255 $ 18,564
====== ======= =========== ====== ======= ======== ========= ========
</TABLE>

The accompanying notes to these combined financial statements
are an integral part of these combined statements.

F-8
<PAGE> 66

STRAYER COLLEGE, INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED DECEMBER MONTHS ENDED MARCH
31, 31,
----------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 4,424 $ 5,552 $ 7,051 $ 3,092 $ 4,736
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization............. 369 448 688 151 195
Provision for student loan losses......... -- -- 49 3 31
Changes in assets and liabilities:
Short-term investments -- restricted...... -- -- (317) (50) (58)
Tuition receivable, net................... (2,943) 2,230 940 367 12
Inventories............................... (124) 13 (179) (159) 7
Other current assets...................... 31 (65) 167 37 30
Trade accounts payable.................... 419 (18) (220) (103) 243
Accrued expenses.......................... 25 153 83 1,444 169
Unearned tuition.......................... (733) 776 113 10 (81)
Other current liabilities................. (132) (14) 75 92 174
Student loans originated or acquired......... -- -- (1,481) (281) (795)
Collections on student loans receivable...... -- -- 500 71 322
Proceeds from sale of loans.................. -- -- -- -- 212
------- ------- ------- ------- -------
Net cash provided by operating
activities......................... 1,336 9,075 7,469 4,674 5,197
------- ------- ------- ------- -------
Cash flows used in investing activities:
Purchases of property and equipment.......... (532) (1,500) (1,162) (467) (188)
Purchases of marketable securities........... (4,386) (6,586) (7,993) (1,422) (1,313)
Sales of marketable securities............... 4,305 5,238 6,386 779 825
Other........................................ (21) 8 (22) -- --
------- ------- ------- ------- -------
Net cash used in investing
activities......................... (634) (2,840) (2,791) (1,110) (676)
------- ------- ------- ------- -------
Cash flows used in financing activities:
Distributions to stockholders................ (2,046) (2,800) (3,350) (725) (1,608)
Proceeds from issuance of common stock and
additional capital contributions by ELP
stockholder............................... -- -- 2,100 500 --
Other........................................ (74) (62) -- -- --
------- ------- ------- ------- -------
Net cash used in financing
activities......................... (2,120) (2,862) (1,250) (225) (1,608)
------- ------- ------- ------- -------
Net (decrease) increase in cash...... (1,418) 3,373 3,428 3,339 2,913
Cash and cash equivalents -- beginning of
period....................................... 3,609 2,191 5,564 5,564 8,992
------- ------- ------- ------- -------
Cash and cash equivalents -- end of period..... $ 2,191 $ 5,564 $ 8,992 $ 8,903 $11,905
======= ======= ======= ======= =======
</TABLE>

The accompanying notes to these combined financial statements
are an integral part of these combined statements.

F-9
<PAGE> 67

STRAYER COLLEGE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1995 AND 1996 IS UNAUDITED)

1. BASIS OF PRESENTATION

The combined financial statements include the accounts of Strayer College,
Inc. and Education Loan Processing, Inc. (collectively the Companies), both of
which are under the common control of Mr. and Mrs. Ron K. Bailey. All
significant intercompany accounts and transactions have been eliminated.

2. NATURE OF OPERATIONS

Strayer College, Inc. (the College) is a proprietary accredited institution
of higher education that provides undergraduate and graduate degrees in various
fields of study. The College has eight campuses located in the District of
Columbia and Virginia.

Education Loan Processing, Inc. (ELP) is a finance company that purchases
and services student loans, principally for the College. ELP was incorporated in
December 1994 and began operations in January 1995.

The significant components of ELP's balance sheets at December 31, 1995 and
March 31, 1996 were as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Cash and cash equivalents............................. $ 909 $ 361
Investments in marketable securities.................. 498 --
Students loans receivable, net........................ 932 1,190
Due to Strayer College, Inc. ......................... 189 326
Stockholder's equity.................................. 2,126 1,150
</TABLE>

For purposes of the Companies' combined balance sheets, all of ELP's assets
and liabilities have been classified as current assets and liabilities with the
exception of student loans receivable, which have been classified as noncurrent
consistent with industry practice. See Note 5. ELP's revenues and expenses for
the year ended December 31, 1995 and three months ended March 31, 1996 were not
significant.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash and cash equivalents consist of operating cash and cash invested in
short-term certificates of deposit, commercial paper, and U.S. government
obligations. The Companies consider all highly liquid instruments purchased with
an original maturity of three months or less to be cash equivalents.

Concentration of Credit Risk

The Companies place their cash and temporary cash investments with high
credit quality institutions. At times cash and cash equivalent balances may be
in excess of the FDIC insurance limit. The Companies have not experienced any
losses on their cash and cash equivalents.

Tuition receivables are not collateralized, however, credit risk is
minimized as a result of the diverse nature of the College's student base in the
Washington, D.C. area. The College establishes an allowance for doubtful tuition
accounts based upon factors surrounding historical trends and other information.

Student loans are receivable from the College's students. The Companies
perform credit evaluations and require cosigners in some instances to minimize
credit risk. Allowances for loan losses are established as discussed below.

F-10
<PAGE> 68

STRAYER COLLEGE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1995 AND 1996 IS UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Student Loans Receivable

Student loans receivable are stated at the amount of unpaid principal,
reduced by an allowance for loan losses. Interest income from student loans is
recognized using the interest method.

Provisions for estimated losses on student loans are charged to income in
amounts sufficient to maintain the allowance at a level considered adequate to
cover the losses of principal and interest in the existing loan portfolio, based
upon historical trends, economic conditions and other information. ELP's
charge-off policy is based on a loan-by-loan review; however, any loan more than
120 days past due is written off against the allowance.

Investments

The Companies' investments are considered "available-for-sale," and, as
such, are stated at market value. The net unrealized gains and losses are
reported as a component of stockholders' equity. Realized gains or losses from
the sale of marketable securities are based on the specific identification
method.

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and
equipment is calculated using the straight-line method over the estimated useful
lives ranging from 3 to 10 years. Depreciation amounted to $369,000, $448,000
and $688,000 for the years ended December 31, 1993, 1994 and 1995, respectively
and $151,000 and $195,000 for the three months ended March 31, 1995 and 1996,
respectively.

Tuition Revenues

Tuition income is deferred at the time of registration and is recognized as
income, net of any refunds or withdrawals, ratably throughout each respective
quarter session. Advance registrations for the next quarter are shown as
unearned tuition.

Inventories

Inventories, which consist of books and supplies held in campus bookstores,
are valued at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of expenses during the
period reported. Actual results could differ from those estimates.

Income Taxes and Pro Forma Information (unaudited)

The financial statements of the Companies do not include a provision for
income taxes because the taxable income of the Companies was included in the
income tax returns of the stockholders under the S Corporation election.

In connection with the formation of Strayer Education, Inc. (Company), the
initial public offering of the Company's common stock (Offering), and the
proposed acquisition of the Companies by the Company, the Companies will no
longer be treated as S Corporations for tax purposes. The Company will be
subject to

F-11
<PAGE> 69

STRAYER COLLEGE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1995 AND 1996 IS UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
federal and state income taxes and will recognize deferred taxes in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). SFAS No. 109 requires companies subject to income taxes
to adjust their deferred tax assets and liabilities based on temporary
differences between financial statement and tax bases of assets and liabilities
using enacted tax rates in effect in the year in which the differences are
expected to reverse. Based upon temporary differences existing as of December
31, 1995 and March 31, 1996, the net deferred income tax assets are
insignificant individually and in total.

The components of the pro forma income tax provisions are as follows (in
thousands):

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
<S> <C> <C>
Current
Federal................................... $ 4,435 $1,574
State..................................... 605 221
------- -------
5,040 1,795
Deferred....................................... 29 57
------- -------
$ 5,069 $1,852
============= ===========
</TABLE>

The effective pro forma income tax rate differs from the 34% statutory
federal rate principally as a result of state income taxes.

For informational purposes, the combined statements of income for the year
ended December 31, 1995 and the three-month period ended March 31, 1996 include
pro forma information reflecting the following adjustments:

- Pro forma net income gives effect to the reduction of costs and expenses
for the year ended December 31, 1995 by $6,175,000, which represents
payments to a stockholder of the College who also serves as President of
the College, for payment of 1995 income taxes on undistributed S
Corporation income. This adjustment is made solely as a result of the
change in the income tax status of the College that will become effective
subsequent to the proposed acquisition of the College by the Company. As
President and Chief Executive Officer of the College after the
acquisition, the stockholder's duties and responsibilities will not
diminish. However, the taxable income of the College will no longer be
included in the income tax return of the stockholders, but will be paid
directly by the College or the Company, as C Corporation tax payors. The
College believes this adjustment is necessary for investors to
realistically assess the impact of the acquisition and related change in
income tax status on the results of operations of the College.

- Pro forma income taxes reflect the application of statutory corporate
income tax rates to the net income of the Companies as if the termination
of the S Corporation status of the Companies had occurred on January 1,
1995. The effective derived income tax rates for the year ended December
31, 1995 and for the three-month period ended March 31, 1996 were 38.3%
and 39.1%, respectively.

- Pro forma net income per share and weighted average shares outstanding
reflect the acquisition of the College by the Company in exchange for
5,999,000 shares of common stock, and the net proceeds from the issuance
of 1,548,181 shares of common stock in connection with the Offering
necessary to pay the $14,042,000 S Corporation distribution based on the
estimated amount of previously recognized and

F-12
<PAGE> 70

STRAYER COLLEGE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1995 AND 1996 IS UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
undistributed College S Corporation income through March 31, 1996, as if
those events had occurred on January 1, 1995. Historical earnings per share of
the Companies have not been presented because such amounts are not
meaningful in light of the pending transactions described above.

The pro forma combined balance sheet as of March 31, 1996 reflects the
following adjustments as if those adjustments occurred March 31, 1996:

- The April 1996 distributions by the College of $2,100,000 discussed in
Note 11.

- The recognition of a liability for the estimated S Corporation
distribution of $14,042,000 (which is subject to adjustment) to be paid
from the proceeds of the Offering.

- The acquisition of the College by the Company in exchange for 5,999,000
shares of common stock.

The remaining retained earnings after the application of the pro forma
adjustments consist of the following (in thousands):

<TABLE>
<S> <C>
College C Corporation retained earnings at the date of the
acquisition by Ron K. Bailey............................... $938
ELP retained earnings at March 31, 1996...................... 8
Adjustment of College retained earnings in connection with
acquisition of the College by the Company for 5,999,000
shares of common stock..................................... (56)
Common stock of the Company.................................. 1
Effect of combining entries.................................. 75
----
$966
====
</TABLE>

Interim Financial Statements

The results of operations for the three months ended March 31, 1995 and
1996 are not necessarily indicative of the results to be expected for the full
fiscal year. All information as of March 31, 1996 and for the three months ended
March 31, 1995 and 1996 is unaudited but, in the opinion of management, contains
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the combined financial position, results of operations and cash
flows of the Companies.

4. INVESTMENTS

Short-Term Investments -- Restricted

The U.S. Department of Education requires Title IV Program loan funds
collected in excess of amounts due for tuition to be kept in a separate cash or
cash equivalent account until such amounts can be remitted to students. These
funds are invested in short-term U.S. Treasury Notes with maturities of three
months or less.

Investments in Marketable Securities

Effective January 1, 1994, the Companies adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115). The effect of adopting SFAS No. 115 was not
material. Under SFAS 115, the marketable securities of the Companies have been
classified as available for sale and are carried at market.

F-13
<PAGE> 71

STRAYER COLLEGE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1995 AND 1996 IS UNAUDITED)

4. INVESTMENTS -- (CONTINUED)
The cost and market value for each class of investments at December 31,
1994 and 1995 are as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
----------------------------------------- -----------------------------------------
GROSS GROSS GROSS GROSS
UNREALIZED UNREALIZED MARKET UNREALIZED UNREALIZED MARKET
COST GAINS LOSS VALUE COST GAINS LOSS VALUE
------ ---------- ---------- ------ ------ ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
obligations.............. $ 934 $-- $(10) $ 924 $2,499 $ 80 $-- $2,579
Equity securities.......... 932 -- (33) 899 975 78 -- 1,053
------ --- ----- ------ ------ ---- --- ------
Total................. $1,866 $-- $(43) $1,823 $3,474 $158 $-- $3,632
====== === ===== ====== ====== ==== === ======
</TABLE>

The cost and market value for each class of investment at March 31, 1996 is
as follows (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
------ ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. Government obligations..................... $1,640 $ 31 $-- $1,671
Equity securities............................... 2,468 77 -- 2,545
------ ---- --- ------
Total...................................... $4,108 $108 $-- $4,216
====== ==== === ======
</TABLE>

The contractual maturities of U.S. Government obligations at December 31,
1995 are as follows (in thousands):

<TABLE>
<CAPTION>
MARKET
COST VALUE
------ ------
<S> <C> <C>
Due in one year or less..................................... $ 678 $ 689
Due after one year through five years....................... 1,351 1,402
Due after five years through 10 years....................... 470 488
------ ------
Total.................................................. $2,499 $2,579
====== ======
</TABLE>

Included in investment income for the years ended December 31, 1994 and
1995 and for the three months ended March 31, 1995 and 1996, were the following
proceeds from the sale of securities:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------- ------------
1994 1995 1995 1996
------ ------ ---- ----
<S> <C> <C> <C> <C>
Gross realized gains................................... $ -- $ -- $ -- $ 14
Gross realized losses.................................. 29 -- -- --
Proceeds............................................... 5,238 6,386 779 825
</TABLE>

F-14
<PAGE> 72

STRAYER COLLEGE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1995 AND 1996 IS UNAUDITED)

5. STUDENT LOANS RECEIVABLE

Student loans receivable are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Student loans receivable outstanding, including
accrued interest.................................... $981 $ 1,270
Allowance for loan losses............................. (49) (80)
------ ---------
Student loans receivable, net.................... $932 $ 1,190
========== =======
</TABLE>

The interest rate on student loans is generally 7.5%.

The Companies believe the carrying value of the student loans approximates
their fair value.

Annual principal payments due under the student loans outstanding at
December 31, 1995 are as follows (in thousands):

<TABLE>
<S> <C>
1996................................................................. $641
1997................................................................. 222
1998................................................................. 64
1999 through 2001.................................................... 54
----
Total........................................................... $981
====
</TABLE>

As of December 31, 1995 and for the three months ended March 31, 1996, the
Companies do not have any student loans receivable which have been identified as
impaired.

6. PROPERTY AND EQUIPMENT

The composition of property and equipment is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Furniture and equipment............... $ 2,965,000 $ 3,910,000 $ 4,097,000
Leasehold improvements................ 894,000 1,092,000 1,093,000
Vehicles.............................. 44,000 63,000 63,000
----------- ----------- -----------
3,903,000 5,065,000 5,253,000
Less -- accumulated depreciation.... (1,503,000) (2,191,000) (2,386,000)
----------- ----------- -----------
$ 2,400,000 $ 2,874,000 $ 2,867,000
========== ========== ==========
</TABLE>

F-15
<PAGE> 73

STRAYER COLLEGE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1995 AND 1996 IS UNAUDITED)

7. STOCKHOLDERS' EQUITY

The Companies' outstanding common stock at December 31, 1995 is summarized
below:

<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES ISSUED
PAR VALUE SHARES AND
PER SHARE AUTHORIZED OUTSTANDING
--------- ---------- -------------
<S> <C> <C> <C>
Strayer College, Inc. ...................... $ 10.00 500 375.5
Education Loan Processing, Inc. ............ $ 1.00 5,000 100
</TABLE>

The Companies' individual retained earnings as of December 31, 1995 and
March 31, 1996 were as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
<S> <C> <C>
Strayer College, Inc. ......................... $13,002 $ 17,080
Education Loan Processing, Inc. ............... 15 8
Effect of combining entries.................... 60 75
----------------- --------------
Total..................................... $13,077 $ 17,163
============= ===========
</TABLE>

8. COMMITMENTS AND CONTINGENCIES

Federal Financial Assistance Programs

The College participates in various federal student financial assistance
programs which are subject to audit. Management believes that the potential
effects of audit adjustments, if any, for the periods currently under audit and
for the periods not yet audited will not have a material adverse effect on the
Companies' financial position, results of operations or cash flows.

Lease Commitments

The College has long-term noncancelable operating leases for its various
campus locations. Rent expense was $2,406,000, $3,309,000 and $3,227,000 for the
years ended December 31, 1993, 1994 and 1995, respectively, and $787,000 and
$826,000 for the three months ended March 31, 1995 and 1996, respectively. The
College has the option to buy certain of these campus properties at their fair
market value as determined by independent appraisal. The Washington D.C.
campuses and three of the Virginia campuses are leased from a stockholder of the
College. Rent paid to the stockholder was $1,046,000, $1,339,000 and $1,896,000
for the years ended December 31, 1993, 1994 and 1995, respectively, and $464,000
and $590,000 for the three months ended March 31, 1995 and 1996, respectively.

F-16
<PAGE> 74

STRAYER COLLEGE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1995 AND 1996 IS UNAUDITED)

8. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
The rents on these leases are subject to an annual increase based on a
stipulated price index. The minimum rental commitments for the College as of
December 31, 1995 are as follows:

<TABLE>
<CAPTION>
AMOUNT PAYABLE
TO STOCKHOLDER
TOTAL INCLUDED IN TOTAL
----------- -----------------
<S> <C> <C>
1996............................................. $ 3,328,000 $ 2,118,000
1997............................................. 3,312,000 2,118,000
1998............................................. 3,173,000 2,118,000
1999............................................. 2,904,000 2,118,000
2000............................................. 2,730,000 2,118,000
Thereafter....................................... 12,291,000 11,265,000
----------- -----------------
Total....................................... $27,738,000 $21,855,000
========== ============
</TABLE>

In connection with the Offering, the College is negotiating with a
stockholder to modify the terms of the leases beginning in 1996.

9. RETIREMENT BENEFIT PLANS

The College has a 401(k) profit sharing trust covering all eligible
employees. Participants may defer a percentage of their salaries or make
contributions up to 10% of their total compensation. Employee contributions are
voluntary. Discretionary contributions are made by the College in the fourth
quarter of each year, and were $44,000, $88,000 and $94,000 for the years ended
December 31, 1993, 1994 and 1995, respectively.

ELP sponsors a Salary Reduction Simplified Employee Pension Plan under
Section 408(k) of the Internal Revenue Code. Qualified employees may defer up to
$9,240 (for 1995) per year in earnings, subject to certain participation
requirements and limitations. ELP may not make contributions to an employee's
pension account.

10. RELATED PARTY TRANSACTIONS

Beginning in 1995, the College retained PRK Investments, Inc. ("PRK") to
provide it with a variety of services including services related to computer
equipment purchasing and the College's compliance with the HEA and Department of
Education regulations applicable to Title IV Programs. Two thirds of the PRK
common stock is owned by children of the stockholders of the College. The
College paid PRK $70,000 and $94,000 for computer equipment purchasing and
related services for the year ended December 31, 1995 and the three months ended
March 31, 1996, respectively. In addition, pursuant to a contract with PRK, the
College made monthly payments of $20,000 to PRK for Title IV services from
January 1, 1996 through May 15, 1996. Beginning May 16, 1996, the computer
equipment purchasing and related services performed by PRK for the College are
performed by employees of ELP. The College provided PRK office space at its old
Huntington Campus location at no cost in 1995 and the first quarter of 1996 at
an estimated cost to the College of $18,000 and $5,000 for the year ended
December 31, 1995 and the three months ended March 31, 1996, respectively.

Beginning in 1994, College faculty and other employees have received
computer-related instruction and training in other occupational skills from
Career Training Institute, Inc. ("CTI"). Eighty percent of the CTI common stock
is owned by children of the stockholders of the College. The College paid CTI
$8,000, $75,000

F-17
<PAGE> 75

STRAYER COLLEGE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1995 AND 1996 IS UNAUDITED)

10. RELATED PARTY TRANSACTIONS -- (CONTINUED)
and $17,000 for its services for the years ended December 31, 1994 and 1995 and
for the three months ended March 31, 1996, respectively. ELP purchased loans
from CTI totalling $76,000 and $110,000 in 1995 and the three months ended March
31, 1996, respectively.

ELP has made loans to Mr. Bailey and his two children aggregating $28,000
and $0 at December 31, 1995 and March 31, 1996, respectively. Such loans bear
interest at 7.5%. Interest income and accrued interest on the loans was
insignificant.

See Note 8 for additional related party transactions.

11. SUBSEQUENT EVENT

In April 1996, the College distributed $2.1 million to its stockholders for
expected tax liabilities in respect to estimated income earned by the College
during the period January 1, 1996 to May 31, 1996.

12. PRIOR PERIOD ADJUSTMENTS

Historically, the College has made distributions to the stockholders which
the stockholders used to fund the acquisition of campus facilities later leased
to the College (See Note 5). In 1995, the College's stockholders also used a
portion of the distributions to establish and capitalize ELP. Total
distributions during the years ended December 31, 1993, 1994 and 1995 were
$2,046,000, $2,800,000 and $3,350,000, respectively.

Previously, the distributions for the years ended December 31, 1993 and
1994 were reported as general and administrative expenses, however these
distributions were not paid and reported on Form W-2 as compensation to a
stockholder. Such distributions have been reported as distributions to
stockholders in the accompanying statements of income, stockholders equity and
cash flows, so that the classification is consistent with the nature of the
transactions.

F-18
<PAGE> 76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 7
The Company............................ 12
Reorganization......................... 12
Use of Proceeds........................ 14
Capitalization......................... 15
Dividend Policy........................ 15
Dilution............................... 16
Selected Financial Data................ 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 19
Business............................... 24
Licensing, Accreditation and Financial
Aid Regulation....................... 33
Management............................. 44
Certain Transactions................... 48
Principal Stockholders................. 51
Description of Capital Stock........... 52
Shares Eligible for Future Sale........ 54
Underwriting........................... 55
Legal Matters.......................... 56
Experts................................ 56
Additional Information................. 56
Index to Financial Statements.......... F-1
</TABLE>

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

3,000,000 SHARES

[STRAYER LOGO]

STRAYER EDUCATION, INC.

COMMON STOCK
------------------------

PROSPECTUS

------------------------
LEGG MASON WOOD WALKER
INCORPORATED
, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 77

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee and NASD filing fee, all amounts are estimates.

<TABLE>
<S> <C>
SEC registration fee.............................................. $ 13,086
NASD filing fee................................................... 5,000
Nasdaq National Market Listing Fee................................ 40,000
Accounting fees and expenses...................................... 200,000
Legal fees and expenses........................................... 275,000
Blue Sky fees and expenses (including counsel fees)............... 20,000
Printing and Engraving expenses................................... 125,000
Transfer Agent and Registrar fees and expenses.................... 4,000
Miscellaneous Expenses............................................ 17,914
--------
Total................................................... $700,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Charter provides that, to the fullest extent that limitations
on the liability of directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the College shall have any liability
to the College or its stockholders for monetary damages. The Maryland General
Corporation Law provides that a corporation's charter may include a provision
which restricts or limits the liability of its directors or officers to the
corporation or its stockholders for money damages except: (1) to the extent that
it is provided that the person actually received an improper benefit or profit
in money, property or services, for the amount of the benefit or profit in
money, property or services actually received, or (2) to the extent that a
judgment or other final adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. The Company's
Charter and By-laws provide that the Company shall indemnify and advance
expenses to its currently acting and its former directors to the fullest extent
permitted by the Maryland General Corporation Law and that the Company shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law.

The Charter and By-laws provide that the Company will indemnify its
directors and officers and may indemnify employees or agents of the Company to
the fullest extent permitted by law against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Company. In addition, the Company's Charter provides that its
directors and officers will not be liable to stockholders for money damages,
except in limited instances. However, nothing in the Charter or By-laws of the
Company protects or indemnifies a director, officer, employee or agent against
any liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. To the extent that a director has been
successful in defense of any proceeding, the Maryland General Corporation Law
provides that he shall be indemnified against reasonable expenses incurred in
connection therewith.

The form of underwriting agreement, filed as Exhibit 1.1 hereto, contains
provisions by which the Underwriters agree to indemnify the Registrant and each
officer, director and controlling person of the Registrant against certain
liabilities.

II-1
<PAGE> 78

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On May 15, 1996, the Company issued 1,000 shares of Common Stock to Mr. and
Mrs. Ron K. Bailey, as joint tenants with a right of survivorship for $1,000 in
cash. No underwriting discount or commission was paid in connection with the
sale. The sale was effected without registration under the Securities Act in
reliance on the exemption provided by Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------
<C> <C> <S>
1.01 ** -- Proposed form of Underwriting Agreement.
3.01 ** -- Certificate of Incorporation of the Company.
3.02 ** -- Amended and Restated Bylaws of the Company.
4.01 ** -- Specimen Stock Certificate.
5.01 ** -- Opinion of Hogan & Hartson L.L.P. as to the legality of the Common Stock
being registered.
10.01 ** -- Lease Agreement, dated as of June 1, 1996 between Strayer College, Inc.
and Fredericksburg Investments, Inc.
10.02 ** -- Lease Agreement, dated as of June 1, 1996 between Strayer College, Inc.
and Beacon Investments, Inc.
10.03 ** -- Lease Agreement, dated as of June 1, 1996 between Strayer College, Inc.
and Battleview Investments, Inc.
10.04 ** -- Lease Agreement, dated as of June 1, 1996 between Strayer College, Inc.
and Central Investments, Inc.
10.05 ** -- Lease Agreement, dated as of June 1, 1996, between Strayer College, Inc.
and Potomac Investments, Inc.
10.06 ** -- Lease Agreement, dated as of April 22, 1991, between Strayer College,
Inc. and Cross Creek Associates Limited Partnership.
10.07 ** -- Lease Agreement, dated as of October 1, 1991, between Strayer College,
Inc. and GLM-Highland Building Limited Partnership.
10.08 ** -- Lease Agreement, dated as of June 15, 1993, between Strayer College, Inc.
and Alexandria Tech Center I.
10.09 ** -- Employment Agreement, dated as of June 1, 1996, between Strayer
Education, Inc. and Ron K. Bailey.
10.10 ** -- Employment Agreement, dated as of June 1, 1996, between Strayer College,
Inc. and Harry T. Wilkins.
10.11 ** -- 1996 Stock Option Plan
10.12 ** -- Form of Tax Indemnification Agreement
10.13 ** -- First Amendment to Agreement of Lease for Office Condominium Space, dated
July 25, 1994, between Strayer College, Inc. and Cross Creek Associates
Limited Partnership.
23.01 ** -- Consent of Hogan & Hartson L.L.P. (contained in Exhibit 5.01).
23.02 -- Consent of Coopers & Lybrand L.L.P.
24.01 -- Power of Attorney (contained in signature page).
27 **+ -- Financial Data Schedule.
99.01 ** -- Consents of Stanley G. Elmore, Todd A. Milano, Dr. Jennie D. Seaton,
Roland Carey, Donald T. Benson, G. Thomas Waite, III, Dr. Donald Stoddard
and Dr. Charlotte Beason.
</TABLE>

- ---------------
** Previously filed.

+ Included in electronic filing via EDGAR.

II-2
<PAGE> 79

(b)Financial Statement Schedules:

Schedule II -- Valuation and Qualifying Accounts and report thereon

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being,
made, a post-effective amendment to this registration statement; (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933 (the "Securities Act"); (ii) to reflect in the prospectus any facts
or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information set
forth in the registration statement; (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of this chapter at the start of
any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Securities Act need not be furnished, provided, that the registrant
includes in the prospectus, by means of a post effective amendment,
financial statements required pursuant to this paragraph (a) (4) and other
information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial
statements.

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 80

SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Washington, District of Columbia, on July 24, 1996.

STRAYER EDUCATION, INC.

By: /s/ RON K. BAILEY

----------------------------------
Ron K. Bailey
Chief Executive Officer and
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to Registration Statement has been signed by the following
persons in the capacities and on the date indicated.

<TABLE>
<C> <S> <C>
/s/ RON K. Chief Executive Officer, President July 24, 1996
BAILEY and Director (Principal Executive
- ------------------------------------- Officer)
Ron K. Bailey
/s/ HARRY T. WILKINS Chief Financial Officer (Principal July 24, 1996
- ------------------------------------- Financial Officer and Principal
Harry T. Wilkins Accounting Officer)
</TABLE>

II-4
<PAGE> 81

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Stockholders
Strayer College, Inc.

In connection with our audits of the combined financial statements of
Strayer College, Inc., and Affiliate as of December 31, 1994 and 1995, and for
each of the three years in the period ended December 31, 1995, which financial
statements are included in the Prospectus, we have also audited the combined
financial statement schedule listed in Item 16 of Part II of the Registration
Statement herein.

In our opinion, this combined financial statement schedule, when considered
in relation to the basic combined financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

Coopers & Lybrand L.L.P.

Washington, D.C.
May 14, 1996
<PAGE> 82

STRAYER COLLEGE, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
BALANCE ADDITIONS BALANCE
BEGINNING OF CHARGED TO END OF
DESCRIPTION PERIOD EXPENSE DEDUCTIONS PERIOD
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deduction from asset account:
Allowance for doubtful accounts:
Three months ended March 31, 1996 (unaudited)... $155 $101 $ (67) $ 189
Year ended December 31, 1995.................... 135 655 (635) 155
Year ended December 31, 1994.................... 453 665 (983) 135
Year ended December 31, 1993.................... 210 853 (610) 453
Allowance for loan loss:
Three months ended March 31, 1996 (unaudited)... 49 31 -- 80
Year ended December 31, 1995.................... -- 49 -- 49
</TABLE>

S-1
<PAGE> 83

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ---------------------------------------------------------------------- ------------
<C> <C> <S> <C>
1.01 ** -- Proposed form of Underwriting Agreement...............................
3.01 ** -- Certificate of Incorporation of the Company...........................
3.02 ** -- Amended and Restated Bylaws of the Company............................
4.01 ** -- Specimen Stock Certificate............................................
5.01 ** -- Opinion of Hogan & Hartson L.L.P. as to the legality of the Common
Stock being registered................................................
10.01 ** -- Lease Agreement, dated as of June 1, 1996 between Strayer College,
Inc. and Fredericksburg Investments, Inc. ............................
10.02 ** -- Lease Agreement, dated as of June 1, 1996 between Strayer College,
Inc. and Beacon Investments, Inc. ....................................
10.03 ** -- Lease Agreement, dated as of June 1, 1996 between Strayer College,
Inc. and Battleview Investments, Inc. ................................
10.04 ** -- Lease Agreement, dated as of June 1, 1996 between Strayer College,
Inc. and Central Investments, Inc. ...................................
10.05 ** -- Lease Agreement, dated as of June 1, 1996, between Strayer College,
Inc. and Potomac Investments, Inc. ...................................
10.06 ** -- Lease Agreement, dated as of April 22, 1991, between Strayer College,
Inc. and Cross Creek Associates Limited Partnership...................
10.07 ** -- Lease Agreement, dated as of October 1, 1991, between Strayer College,
Inc. and GLM-Highland Building Limited Partnership....................
10.08 ** -- Lease Agreement, dated as of June 15, 1993, between Strayer College,
Inc. and Alexandria Tech Center I.....................................
10.09 ** -- Employment Agreement, dated as of June 1, 1996, between Strayer
Education, Inc. and Ron K. Bailey.....................................
10.10 ** -- Employment Agreement, dated as of June 1, 1996, between Strayer
College, Inc. and Harry T. Wilkins....................................
10.11 ** -- 1996 Stock Option Plan................................................
10.12 ** -- Form of Tax Indemnification Agreement.................................
10.13 ** -- First Amendment to Agreement of Lease for Office Condominium Space,
dated July 25, 1994, between Strayer College, Inc. and Cross Creek
Associates Limited Partnership........................................
23.01 ** -- Consent of Hogan & Hartson L.L.P. (contained in Exhibit 5.01).........
23.02 -- Consent of Coopers & Lybrand L.L.P. ..................................
24.01 -- Power of Attorney (contained in signature page).......................
27 **+ -- Financial Data Schedule...............................................
99.01 ** -- Consents of Stanley G. Elmore, Todd A. Milano, Dr. Jennie D. Seaton,
Roland Carey, Donald T. Benson, G. Thomas Waite, III, Dr. Donald
Stoddard and Dr. Charlotte Beason.....................................
</TABLE>

- ---------------
** Previously filed.

+ Included in electronic filing via EDGAR.

<PAGE> 1
EXHIBIT 23.02

[COOPERS & LYBRAND LETTERHEAD]

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Registration Statement on Amendment
No. 4 to Form S-1 (No. 333-3967) of our report dated May 15, 1996, on our audit
of the balance sheet of Strayer Education, Inc. as of May 15, 1996, and our
report dated May 14, 1996, on our audits of the combined balance sheets of
Strayer College, Inc. and Affiliate as of December 31, 1995 and 1994, and the
related combined statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. We also consent
to the reference to our firm under the caption "Experts".

Coopers & Lybrand L.L.P.

Washington D.C.
July 24, 1996