STRAYER EDUCATION INC, S-1/A, 1997-03-26

STRAYER EDUCATION INC
S-1/A, 1997-03-26
EDUCATIONAL SERVICES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1997

REGISTRATION NO. 333-23601

================================================================================

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

AMENDMENT NO. 1

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

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

<TABLE>
<S> <C>
MARYLAND 8221
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>

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:

<TABLE>
<S> <C>
WALTER G. LOHR, JR. STUART A. SHELDON
HOGAN & HARTSON L.L.P. DOW, LOHNES & ALBERTSON, PLLC
111 S. CALVERT STREET 1200 NEW HAMPSHIRE AVENUE, N.W.
SUITE 1600 SUITE 800
BALTIMORE, MD 21202 WASHINGTON, DC 20036
(410) 659-2700 (202) 776-2000
</TABLE>

------------------------
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, DATED MARCH 26, 1997

PROSPECTUS

1,150,000 SHARES

STRAYER LOGO

STRAYER EDUCATION, INC.

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

Of the 1,150,000 shares of common stock (the "Common Stock") offered hereby
(the "Offering"), 600,000 shares are being sold by Strayer Education, Inc. (the
"Company") and 550,000 shares are being sold by certain stockholders of the
Company (the "Selling Stockholders"). The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders. See "Principal and
Selling Stockholders."

The Common Stock is listed on the Nasdaq National Market (the "Nasdaq")
under the trading symbol "STRA." The last sales price of the Common Stock as
reported on the Nasdaq on March 25, 1997 was $21.75 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

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

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>
==================================================================================================
PROCEEDS TO
PRICE TO PROCEEDS TO SELLING
PUBLIC UNDERWRITING COMPANY(2) STOCKHOLDERS
DISCOUNTS AND
COMMISSIONS(1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $ $ $ $
- --------------------------------------------------------------------------------------------------
Total(3) $ $ $ $
==================================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. For information regarding
indemnification of the Underwriters, see "Underwriting."
(2) Before deducting expenses of the Offering, estimated at $350,000, which
are payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to 172,500 additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. Proceeds to Selling Stockholders will not be
affected.
------------------

The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1997 at the offices of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.
------------------

SMITH BARNEY INC. LEGG MASON WOOD WALKER
INCORPORATED

, 1997
<PAGE> 3

[MAP OF GREATER WASHINGTON D.C. AND SURROUNDING AREA INDICATING
CAMPUS LOCATIONS INSERTED HERE]

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS AND OTHER SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE EXCHANGE ACT.
SEE "UNDERWRITING."

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE> 4

PROSPECTUS SUMMARY

The following summary information is qualified in its entirety by the more
detailed information and consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus. Except as otherwise indicated herein,
(i) the information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option and (ii) all references to the Company in this Prospectus
include Strayer Education, Inc. and its wholly-owned subsidiaries, Strayer
College, Inc., a Maryland corporation ("Strayer" or the "College"), and
Education Loan Processing, Inc., a Virginia corporation ("ELP"). This Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Risk Factors" as well as
those discussed elsewhere in this Prospectus.

THE COMPANY

Strayer is a regional proprietary institution of higher education offering
undergraduate and graduate courses to more than 8,000 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 and the
College will begin offering classes at its ninth campus in Prince George's
County, Maryland in the 1997 Spring quarter. The College is accredited by the
Commission on Higher Education of the Middle States Association of Colleges and
Schools ("Middle States"), one of the six regional collegiate accrediting
agencies 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 1996 Fall quarter, approximately 60% were age 30 or
over, and approximately 64% 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.
To accommodate the scheduling requirements of 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. 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 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 nine, enrollment has increased from approximately
2,900 students at the beginning of the 1990 Fall quarter to approximately 8,200
students at the beginning of the 1996 Fall quarter, and annual revenues have
increased from approximately $11.3 million for the year ended December 31, 1990
to approximately $45.0 million for the year ended December 31, 1996. 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 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.

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, the Company has extended educational loans through an internal program,
the Strayer Education Loan Program (the "SEL

3
<PAGE> 5

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 2005 approximately 42% of the 16.1 million
students projected to be enrolled in institutions of higher education will be
adults over the age of 24. 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.

BUSINESS STRATEGY

Strayer's objective is to strengthen its position in its region as the
leading degree-granting proprietary institution offering business-oriented
education to working adults. The Company seeks to achieve continued revenue and
earnings growth primarily by increasing enrollment through (i) the establishment
of new campuses in its current market and contiguous areas, (ii) the development
of new delivery formats, such as offering distance learning programs over the
Internet, (iii) the expansion and upgrade of existing curricula, (iv) the
development of new course offerings, and (v) the further development of on-site
training programs for governmental and corporate employers. As an additional
attraction to potential students, Strayer also intends to expand the SEL Program
to give students greater flexibility in financing their education. The Company
believes that it is strongly positioned to capitalize on projected demographic
and market trends, including the projected increase in the number of high school
graduates, the projected increase in the number of adults seeking further
education and the expected increase in demand for business-oriented courses.

RECENT DEVELOPMENTS

The Company completed an initial public offering of its Common Stock in
July 1996, the proceeds of which were used to make an S Corporation distribution
to the College's former stockholder, to acquire ELP and expand the SEL Program,
to acquire the College's Loudoun campus facilities in Virginia, to establish its
Prince George's County, Maryland campus, and to expand its distance learning
programs. In 1996, the College originated 1,263 SEL Program loans aggregating
$3.2 million. This program is designed to reduce the College's administrative
costs, lessen its dependence on federal student financial aid programs and
enhance its ability to attract and retain qualified students.

The College will begin offering classes at its Prince George's County,
Maryland campus in April 1997 and is developing a proposal to establish a campus
in Montgomery County, Maryland in 1998. In addition, the College has offered its
graduate program in computer information systems at the Southern Maryland Higher
Education Center in California, Maryland since the 1996 Fall quarter and,
subject to regulatory approvals, expects to be able to offer upper level
undergraduate courses in its bachelor's programs in computer information systems
and business administration at that site beginning in the 1997 Fall quarter. The
College is also exploring alternative educational delivery systems to broaden
its student base, and has submitted a proposal for approval of a distance
learning program called "Strayer ONLINE" to the District of Columbia Education
Licensure Commission. Under the proposal, the College would increase its online
course offerings from selected master's courses presently offered to include the
College's entire curriculum. The College is establishing facilities for Strayer
ONLINE at a Distance Learning Center in Lorton, Virginia.

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 by the Company..... 600,000 shares
Common Stock offered by the Selling
Stockholders(1)....................... 550,000 shares
Total......................... 1,150,000 shares
Common Stock to be outstanding after the
Offering(2)........................... 10,050,000 shares
Use of proceeds by the Company.......... To provide funds to increase the SEL Program, to
purchase the College's Alexandria, Virginia campus,
to expand the College's distance learning programs
and its operations in Maryland and for other
corporate purposes. The Company will not receive
any proceeds from the sale of the shares of Common
Stock by the Selling Stockholders.
Nasdaq National Market symbol........... "STRA"
</TABLE>

- ---------------
(1) Includes 100,000 shares of Common Stock owned by Strayer College Educational
Foundation, a 501(c)(3) corporation. See "Business -- Strayer College
Educational Foundation."

(2) Excludes 1,000,000 shares of Common Stock reserved for issuance under the
Company's stock option plan, of which options for 646,674 shares of Common
Stock were outstanding as of March 18, 1997. See "Management and

Directors -- Stock Option Plan."

5
<PAGE> 7

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
PRO
FORMA
1992 1993 1994 1995 1996 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................... $23,793 $29,368 $34,257 $38,196 $45,005 $45,005
Costs and expenses(1).................. 21,298 25,124 29,055 32,020 29,014 29,014
------- ------- ------- ------- ------- -------
Income from operations................. 2,495 4,244 5,202 6,176 15,991 15,991
Investment and other income............ 184 180 350 875 1,061 1,061
------- ------- ------- ------- ------- -------
Income before taxes.................... 2,679 4,424 5,552 7,051 17,052 17,052
Provision for income taxes(2).......... -- -- -- -- 2,740 6,649
------- ------- ------- ------- ------- -------
Net income............................. $ 2,679 $ 4,424 $ 5,552 $ 7,051 $14,312 $10,403
======= ======= ======= ======= ======= =======
PRO FORMA DATA:(3)
Income before income taxes............. $17,052
Income taxes........................... 6,649
-------
Net income............................. $10,403
=======
Net income per share................... $ 1.24
=======
Weighted average shares
outstanding(4)...................... 8,410
=======
OPERATING DATA:
Enrollment(5).......................... 5,600 6,200 6,800 7,400 8,200
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 3,609 $ 2,191 $ 5,564 $ 8,992 $11,777
Working capital........................ 3,063 5,195 5,934 8,327 15,574
Total assets........................... 14,396 16,279 19,824 25,878 47,822
Long-term liabilities.................. 62 -- -- -- 189
Total liabilities...................... 10,146 9,651 10,487 10,539 12,411
Total stockholders' equity............. 4,250 6,628 9,337 15,339 35,411
</TABLE>

- ---------------
(1) Includes bonus payments to the former stockholder of the College (the "S
Corporation Stockholder") of $0.9 million in 1992, $3.5 million in 1993,
$5.5 million in 1994, and $6.2 million in 1995 for the payment of income
taxes by that stockholder on undistributed S Corporation income. In
connection with the Company's initial public offering, effective July 25,
1996, the Company acquired the College and ELP, as a result of which the
College and ELP changed their tax status from S Corporations to C
Corporations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Background and Overview."

(2) Historical data for 1992 through 1995 do not reflect any provision for
income taxes. The College and ELP were S Corporations during such periods
and therefore were not subject to income tax.

(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, 1996. Following
the termination of their status as S Corporations prior to completion of the
Company's initial public offering, the College and ELP became subject to
federal and state income tax. 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,
1996. The effective pro forma income tax rate for the year ended December
31, 1996 was 39%.

(4) Shares have been adjusted to reflect the acquisition of the College by the
Company and the issuance of 1,401,000 shares of Common Stock which, when
multiplied by the net per share proceeds of the initial public offering,
would have been necessary to fund distributions to the S Corporation
Stockholder during the 12 months ended July 1996, to the extent such
distributions exceeded net income during the same period. These
distributions included those made subsequent to the closing of the initial
public offering to the S Corporation Stockholder in respect of earnings
previously subject to income tax during the College's period as an S
Corporation.

(5) Reflects student enrollment as of the beginning of the Fall academic quarter
for each year indicated. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality."

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
of Common Stock 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, as well as those discussed
elsewhere in this Prospectus, 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" or "Department of Education");
(ii) the accrediting agencies recognized by the Department of Education; and
(iii) state higher education regulatory bodies. In addition, the regulations,
standards and policies of these regulatory agencies frequently change, and
changes in, or new interpretations of, applicable laws, regulations or standards
could have a material adverse effect on the College's accreditation,
authorization to operate in various states, permissible activities, receipt of
funds under Title IV Programs 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. For the year
ended December 31, 1996, the College derived approximately 48% of its revenues
from Title IV Programs. 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 Department 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 the
Maryland Higher Education Commission. 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 would, among other
things, render the College ineligible to participate in Title IV Programs for
students in that state or at that 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 the rate of student defaults on
the repayment of federally guaranteed student loans (known as "cohort default
rates") exceeds certain rates. 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 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 1992, 1993 and 1994 federal fiscal
years, the most recent federal fiscal years for which this information is
available, were 10.6%, 16.6% and 16.0%, respectively.

In addition, if an institution's cohort default rate for federally
guaranteed student loans equals or exceeds 25% for any of the three most recent
federal fiscal years, or if its cohort default rate for loans under the Federal
Perkins loan program exceeds 15% for any federal award year, the Department may
determine that the institution lacks administrative capability and may place the
institution on provisional certification status or take other remedial actions.
Provisional certification does not limit an institution's access to Title IV
Program funds, but does subject the institution to closer review by the
Department of Education and may subject the

7
<PAGE> 9

institution to summary adverse action if it violates other Title IV Program
requirements. The College's cohort default rates under the Perkins loan program
in federal award years 1994, 1995 and 1996 were 4.0%, 11.6% and 18.6%,
respectively. Based on its Perkins loan cohort default rate for 1996, the
College could be placed on provisional certification status or subjected to
other remedial actions. 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
administrative capability and, therefore, to require the repayment of Title IV
Program funds, to transfer the institution from the "advance" system of payment
of Title IV Program funds to the "reimbursement" system of payment, to place the
institution on provisional certification status, or to commence a proceeding to
impose a fine or to limit, suspend or terminate the participation of the
institution in Title IV Programs.

Failure to Demonstrate Financial Responsibility. The HEA and the
regulations issued thereunder impose specific 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, 1996, the College's "acid test" ratio was 1.69-to-1. 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
may have significant regulatory consequences for the College. The HEA provides
that an institution which undergoes a change in ownership resulting in a change
of control loses its eligibility to participate in the Title IV Programs and
must apply to the Department of Education in order to re-establish such
eligibility. For a publicly-traded corporation, the securities of which are
required to be registered with the Securities and Exchange Commission ("SEC")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), such as the Company, the Department of Education regulations implementing
the HEA define a change in ownership resulting in a change of control as
occurring when a change of control of the corporation takes place that gives
rise to the obligation on the part of the corporation to file a Form 8-K with
the SEC notifying that agency of the change of control. The Company has
determined that the Offering and related transactions will not give rise to the
obligation to file a Form 8-K with the SEC. The College's accrediting agency and
state licensing agencies utilize somewhat different standards from the
Department of Education, and the Company does not believe the Offering and
related transactions require any approvals by any of these entities. However, if
the College undergoes a change in ownership and is not recertified by the
Department of Education, does not obtain reauthorization from the necessary
state agencies or has its accreditation withdrawn, or experiences significant
delay in obtaining approval from any of these bodies, the change would have a
material adverse effect on the College. Because of the control position of Ron
K. Bailey and Beverly Bailey, as joint tenants with rights of survivorship, any
disposition of Common Stock by them that results in a loss of control by them
may have material adverse consequences for the Company under applicable federal
and state regulations and accrediting agency

8
<PAGE> 10

requirements, including potential loss of eligibility to participate in the
Title IV Programs. There can be no assurance that Mr. and Mrs. Bailey will
maintain their ownership interests in the Company or as to the manner or timing
of the sale of any Common Stock by them. See "Licensing, Accreditation and
Financial Aid Regulation -- Change in Ownership Resulting in a Change of
Control."

Legislative Action. The HEA was most recently reauthorized by the U.S.
Congress in 1992, at which time funding for the Title IV Programs was authorized
through September 30, 1997, with an automatic one-year extension if the HEA were
not reauthorized by that date. The Congress has commenced the reauthorization
process, which is expected to be completed in late 1997 or during 1998. Although
there is no present indication that the Congress will decline to reauthorize the
Title IV Programs, at this time it is not possible to predict the outcome of the
reauthorization process. There can be no assurance that federal funding will
continue to be available for any or all Title IV Programs for proprietary
institutions such as the College, that such funding will be maintained at
current levels for any or all such programs, that current requirements for
student and institutional participation will be unchanged, or that one or more
present Title IV Programs will not be replaced by other programs with materially
different student or institutional eligibility requirements or benefits. Given
the significant percentage of the Company's revenues that are indirectly derived
from the Title IV Programs, the loss of or a significant reduction in Title IV
Program funds available to the College's students would have a material adverse
effect on the Company.

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

Postsecondary education 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 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 and Directors."

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 amount of these loans originated in
1996 was approximately $3.2 million. See "Business -- SEL Program." The College
intends to further expand the SEL Program following completion of the Offering.
The Company 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.

9
<PAGE> 11

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 Company has made a substantial investment in augmenting these
systems and resources to support future growth, there can be no assurance that
the Company will be able to manage any further expansion effectively. Failure to
do so would have a material adverse effect on the Company's financial condition,
results of operations and regulatory compliance.

CONCENTRATION OF SHARE OWNERSHIP; ANTI-TAKEOVER EFFECT

Upon completion of the Offering, Ron K. Bailey, jointly with his spouse,
will beneficially own approximately 54.2% of the outstanding Common Stock (51.0%
on a fully-diluted basis). As a result, Mr. Bailey 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 is 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 and Selling Stockholders" and
"Description of Capital Stock." In addition, a change in ownership resulting in
a change of control of the Company would trigger a requirement for
recertification of the College by the Department of Education, a review of the
College's accreditation by Middle States and reauthorization by certain state
licensing agencies. These factors may tend to discourage attempts to acquire
control of the Company from Mr. Bailey. See "Licensing, Accreditation and
Financial Aid Regulation -- Change in Ownership Resulting in a Change of
Control."

DIVIDEND POLICY

Although the Company has established a policy of declaring cash dividends,
there can be no assurances that dividends will continue to 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 10,050,000 shares of Common Stock of
the Company outstanding (excluding 646,674 shares issuable upon exercise of
options outstanding as of March 18, 1997). Of these shares, all of the 1,150,000
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. Of the
remaining 8,900,000 shares of Common Stock, 5,450,000 shares are held by Mr. Ron
K. Bailey and his spouse and are "restricted securities" as that term is defined
in Rule 144. The Company and Mr. and Mrs. Bailey 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 exercise of options granted under
the Company's stock option plan), for a period of 180 days after the date of
this Prospectus without the consent of Smith Barney Inc. Commencing 90 days
after the date of this Prospectus, and subject to such consent, all but 1,000 of
the 5,450,000 shares owned by Mr. and Mrs. Bailey 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."

10
<PAGE> 12

THE COMPANY

The College is a regional proprietary institution of higher education
accredited by Middle States that offers business-oriented undergraduate and
graduate courses at nine campuses in Washington, D.C., Northern Virginia and
Maryland. At the beginning of the 1996 Fall quarter, approximately 8,200 Strayer
students were pursuing studies in accounting, business administration, computer
information systems, economics, marketing and general studies.

The Company was formed in Maryland in May 1996, and acquired 100% of the
outstanding capital stock of the College from Mr. and Mrs. Ron K. Bailey in
anticipation of the Company's initial public offering in July 1996. The Company
used a portion of the net proceeds of that offering to purchase 100% of the
outstanding capital stock of ELP from Mr. Bailey. The Company's business is
operated solely through its subsidiaries and the Company has no other
operations.

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 8,200 students at the beginning of the 1996 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.

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

11
<PAGE> 13

USE OF PROCEEDS

The net proceeds to the Company from the Offering at an assumed public
offering price of $24.00 per share (after deduction of estimated underwriting
discounts and commissions and Offering expenses) are expected to be
approximately $13.3 million (approximately $17.2 million if the Underwriters'
over-allotment option is exercised in full). The Company will not receive any
proceeds from the sale of the shares of Common Stock by the Selling
Stockholders.

Net proceeds of the Offering of approximately $6.0 million will be used to
increase the SEL Program, approximately $3.1 million will be used for the
possible acquisition of the Alexandria campus facilities from an unaffiliated
party, and the balance will be used for expansion of the College's distance
learning programs and Maryland expansion and for other corporate purposes. See
"Business -- Business Strategy." As of the date of this Prospectus, the College
has not exercised its purchase option under the lease for the Alexandria campus
facility.

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

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the Nasdaq under the trading symbol "STRA."
The following table sets forth, for the periods indicated, the high and low
prices of the Company's Common Stock, as reported on the Nasdaq. The initial
public offering price on July 25, 1996 was $10.00 per share.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1996:
Third Quarter (July 25 through September 30)............... $17.88 $10.25
Fourth Quarter............................................. 23.00 16.38
1997:
First Quarter (through March 24)........................... $27.25 $21.00
</TABLE>

The last sales price of the Common Stock on March 25, 1997, as reported on
the Nasdaq, was $21.75 per share. As of March 17, 1997, there were approximately
7 holders of record. The Company believes that there are a number of other
holders of Common Stock whose shares are held in nominee accounts by brokers.

DIVIDEND POLICY

The Company has established a 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.

12
<PAGE> 14

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1996 and as adjusted to reflect the receipt of the estimated net
proceeds of the Offering by the Company of $13.3 million (based upon an assumed
public offering price of $24.00 per share). See "Use of Proceeds."

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------
AS
ACTUAL ADJUSTED
------- --------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt........................................................... $ -- $ --
------- -------
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized; no shares
issued or outstanding............................................... -- --
Common Stock, $.01 par value, 20,000,000 shares authorized; 9,450,000
and 10,050,000 shares issued and outstanding, respectively.......... 95 101
Additional paid-in capital............................................. 31,192 44,444
Retained earnings...................................................... 3,893 3,893
Net unrealized gains on investments.................................... 231 231
------- -------
Total stockholders' equity..................................... 35,411 48,669
------- -------
Total capitalization........................................... $35,411 $ 48,669
======= =======
</TABLE>

13
<PAGE> 15

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

The following table sets forth, for the periods and at the dates indicated,
selected consolidated financial data for the Company. The financial information
as of December 31, 1993, 1994, 1995 and 1996 and for each of the years then
ended has been derived from the Company's consolidated financial statements,
which statements have been audited by Coopers & Lybrand L.L.P., independent
public accountants. The financial information as of December 31, 1992 and for
the year 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 Company's consolidated financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
PRO FORMA
INCOME STATEMENT DATA: 1992 1993 1994 1995 1996 1996
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Tuition...................................... $22,961 $28,545 $33,238 $36,934 $42,775 $42,775
Fees and other............................... 832 823 1,019 1,262 2,230 2,230
------- ------- ------- ------- ------- -------
23,793 29,368 34,257 38,196 45,005 45,005
------- ------- ------- ------- ------- -------
Costs and expenses
Instruction and educational support.......... 9,262 14,185 14,740 16,168 17,808 17,808
Selling and promotion........................ 2,758 3,092 3,667 4,281 4,457 4,457
General and administration(1)................ 9,278 7,847 10,648 11,571 6,749 6,749
------- ------- ------- ------- ------- -------
21,298 25,124 29,055 32,020 29,014 29,014
------- ------- ------- ------- ------- -------
Income from operations......................... 2,495 4,244 5,202 6,176 15,991 15,991
Investment and other income.................... 184 180 350 875 1,061 1,061
------- ------- ------- ------- ------- -------
Income before taxes............................ 2,679 4,424 5,552 7,051 17,052 17,052
Provision for income taxes(2).................. -- -- -- -- 2,740 6,649
------- ------- ------- ------- ------- -------
Net income..................................... $ 2,679 $ 4,424 $ 5,552 $ 7,051 $14,312 $10,403
======= ======= ======= ======= ======= =======
Cash dividends per common share................ $0.0625
=======

PRO FORMA DATA:(3)
Income before income taxes..................... $17,052
Income taxes................................... 6,649
-------
Net income..................................... $10,403
=======
Net income per share........................... $ 1.24
=======
Weighted average shares outstanding(4)......... 8,410
=======

OPERATING DATA:
Enrollment(5).................................. 5,600 6,200 6,800 7,400 8,200
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 3,609 $ 2,191 $ 5,564 $ 8,992 $11,777
Working capital................................ 3,063 5,195 5,934 8,327 15,574
Total assets................................... 14,396 16,279 19,824 25,878 47,822
Long-term liabilities.......................... 62 -- -- -- 189
Total liabilities.............................. 10,146 9,651 10,487 10,539 12,411
Total stockholders' equity..................... 4,250 6,628 9,337 15,339 35,411
</TABLE>

14
<PAGE> 16

- ---------------
(1) Includes bonus payments to the S Corporation Stockholder of $0.9 million in
1992, $3.5 million in 1993, $5.5 million in 1994, and $6.2 million in 1995
for the payment of income taxes by the S Corporation Stockholder on
undistributed S Corporation income. In connection with the Company's initial
public offering, effective July 25, 1996, the Company acquired the College
and ELP, as a result of which the College and ELP changed their tax status
from S Corporations to C Corporations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Background and
Overview."

(2) Historical data for 1992 through 1995 do not reflect any provision for
income taxes. The College and ELP were S Corporations during such periods
and therefore were not subject to income tax.

15
<PAGE> 17

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 nine campuses in the
greater Washington, D.C. area. The Company was incorporated in May 1996 to
acquire all of the outstanding capital stock of the College and ELP from Mr. and
Mrs. Ron K. Bailey, the previous sole stockholder of the College. Upon
completion of the Company's initial public offering in July 1996, the College
and ELP, which administers the SEL Program, became direct subsidiaries of the
Company.

Revenues, operating income and net income have increased in each of the
last three years. From 1994 through 1996, revenues increased approximately
31.4%, operating income increased approximately 207%, and net income increased
approximately 157.8%. Over the three-year period, tuition revenue accounted for
approximately 96% of total revenue. The number of students increased
approximately 20.9% from 6,760 at the beginning of the 1994 Fall quarter to
8,172 at the beginning of the 1996 Fall quarter, and tuition rates increased
approximately 14% over the last three years.

Since 1993, the Company relocated three campuses to larger facilities,
expanded information technology course offerings, added more weekend classes,
increased its marketing programs, and began the SEL Program. In 1995, the
Company added personnel in the areas of human resources, facilities management
and administration to support its plans for expansion. In addition, in 1996, the
Company purchased its Loudoun, Virginia campus facility, leased a facility in
Maryland for the opening of its Prince George's County campus and added course
offerings through the Internet.

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. When students register for courses,
tuition is recorded as unearned tuition, which is 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, which is the beginning of the academic year and
the industry practice for measuring enrollments at educational institutions.

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 quarters,
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 unearned tuition. Based upon past experience and judgment, the
College establishes an allowance for doubtful accounts with respect to accounts
receivable not included in unearned tuition. 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 year ended December 31,
1994, 1995 and 1996 was 1.9%, 1.7% and 1.8%, respectively.

The College's expenses consist of instruction and educational support
expenses, selling and promotional expenses and general and administration
expenses. Instruction and educational support expenses generally contain 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 expenses
also include cost of educational supplies and facilities, including rent on
campus leases, certain costs of 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.

16
<PAGE> 18

Selling and promotional expenses include 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 expenses include 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 expenses prior to 1996 reflect
payments made to the S Corporation Stockholder for taxes payable by that
stockholder with respect to the College's income.

Prior to 1996, the College each year paid the S Corporation Stockholder
amounts sufficient to pay the income tax liabilities of the College for income
earned 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 expenses. These bonus payments totaled $5.5
million and $6.2 million for the fiscal years ended 1994 and 1995, respectively.
Amounts paid to the stockholder from January 1, 1996 through July 25, 1996 (the
date of completion of the Company's initial public offering of Common Stock)
with respect to the College's income were paid as distributions to the
stockholder and not to the stockholder as a bonus. Unlike bonuses, such
distributions are not reflected as general and administration expenses. As of
July 25, 1996, the Company terminated the College's S Corporation status and
became subject to corporate income taxation on a consolidated basis.

Investment and other income consist primarily of earnings on investments.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Revenues:
Tuition................................................... 97.0% 96.7% 95.0%
Fees and other............................................ 3.0 3.3 5.0
----- ----- -----
100.0 100.0 100.0
----- ----- -----

Costs and expenses:
Instruction and educational support....................... 43.0 42.3 39.6
Selling and promotional................................... 10.7 11.2 9.9
General and administration................................ 31.1 30.3 15.0
----- ----- -----

Income from operations...................................... 15.2 16.2 35.5
Investment and other income................................. 1.0 2.3 2.4
----- ----- -----
Income before taxes......................................... 16.2 18.5 37.9
Provision for income taxes.................................. -- -- 6.1
----- ----- -----
Net income.................................................. 16.2% 18.5% 31.8%
===== ===== =====
</TABLE>

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Revenues. Tuition revenues increased approximately 15.8% from $36.9
million in 1995 to $42.8 million in 1996 due to a 9.6% increase in the number of
students in 1996 and a 6% tuition increase for 1996. Fees and other revenue
increased approximately 76.7% from $1.3 million in 1995 to $2.2 million in 1996,
primarily as a result of the increased activity in ELP, the Company's
wholly-owned financing subsidiary.

Instruction and educational support expenses. Instruction and educational
support expenses increased approximately 10.1% from $16.2 million in 1995 to
$17.8 million in 1996 due to an increase in the number of personnel to support
increased enrollment, salary increases and the upgrade of campus computer
laboratories.

17
<PAGE> 19

Selling and promotional expenses. Selling and promotional expenses
increased approximately 4.1% from $4.3 million in 1995 to $4.5 million in 1996,
due principally to increased advertising costs.

General and administration expenses. General and administration expenses
decreased 41.7% from approximately $11.6 million in 1995 to $6.8 million in
1996. The primary reason for the decrease was the fact that the Company did not
pay a bonus to its stockholder in respect of income taxes in 1996. Excluding the
$6.2 million bonus in 1995, general and administration expenses would have
increased approximately 25% due to increases in expenses associated with being a
public company and increases in the number of administrative personnel to
support increased enrollment.

Income from operations. Income from operations increased approximately
159% from $6.2 million in 1995 to $16 million in 1996. This increase was due to
the increase in student enrollment in 1996 and due to the fact that the College
did not pay bonuses to its stockholder, as discussed above.

Net income. Net income increased approximately 103% from $7.1 million in
1995 to $14.3 million in 1996 because of the factors discussed above.

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

Revenues. Tuition revenue increased 11.1% from $33.2 million in 1994 to
$36.9 million in 1995, due to an 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 expenses. Instruction and educational
support expenses 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 promotional expenses. Selling and promotional expenses
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 expenses. General and administration expenses
increased 8.7% from $10.6 million in 1994 to $11.6 million in 1995, due
principally to an increase in the bonus paid to the S Corporation Stockholder in
respect of income taxes. Excluding the bonuses in both years, general and
administration expenses 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 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 Program
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 loans made by the College to students at
a substantial discount from their face value. The discount was recorded as a
cost of financing reflected in general and administration expenses. 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.

18
<PAGE> 20

SEASONALITY

The Company's quarterly results of operations tend to vary significantly
within a year because of student enrollment patterns. Enrollment generally is
highest in the fourth, or Fall, quarter, and lowest in the third, or Summer,
quarter. In 1996, enrollments at the beginning of the Winter, Spring, Summer and
Fall academic quarters were 7,096, 7,100, 4,851 and 8,172, 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 expenses are lower in the third quarter because fewer part-time faculty
are needed.

The following table sets forth the Company's revenues on a quarterly basis
for the years ended December 1994, 1995 and 1996.

QUARTERLY REVENUE
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995 1996
------------------- ------------------- -------------------
THREE MONTHS ENDED AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
March 31.................... $ 9,169 27% $10,635 28% $12,415 28%
June 30..................... 8,427 25 9,702 25 11,614 26
September 30................ 7,501 22 7,221 19 8,305 18
December 31................. 9,160 26 10,638 28 12,671 28
------- --- ------- --- ------- ---
Total for Year.............. $34,257 100% $38,196 100% $45,005 100%
======= === ======= === ======= ===
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Prior to the initial public offering of its Common Stock, the Company
financed its operating and capital requirements through cash generated from
operating activities or, in the case of ELP, capital contributions from ELP's
stockholder. The Company realized net proceeds of approximately $31.3 million
from the initial public offering, of which it used $19.8 million to fund S
Corporation distributions, $1.1 million to fund the acquisition of ELP and $3.1
million to fund the purchase of the Loudoun campus. The remaining $7.3 million
was used to fund the SEL Program and for working capital purposes, including
improvements to the College's computer laboratories.

The Company expects to realize net proceeds from the Offering, after
deduction of estimated underwriting discounts and commissions and offering
expenses, of approximately $13.3 million (approximately $17.2 million if the
Underwriters' over-allotment option is exercised in full). Of that amount, the
Company intends to use approximately $6.0 million to increase funding for the
SEL Program, $3.1 million for the possible acquisition of the Alexandria campus,
and the balance for expansion of the College's distance learning programs and
Maryland expansion and for other corporate purposes.

During 1996, the Company generated cash from operating activities of $13.6
million. This cash and the remaining proceeds from the Company's initial public
offering resulted in an increase in cash and cash equivalents and marketable
securities from $12.6 million at December 31, 1995 to $26.9 million at December
31, 1996. In addition, the Company is negotiating a credit facility from a bank
in an amount not to exceed $10.0 million. Interest on any borrowings under such
a facility would accrue at an annual rate not to exceed 0.75% above the London
Interbank Offered Rate. The Company would not pay a fee for this facility, but
in the event of any borrowings, an origination fee of 1% would be due on the
amounts borrowed from time to time thereunder.

The Company believes that the cash available from the proceeds of the
Offering, existing cash and cash equivalents, marketable securities, cash
generated from operating activities and, if necessary, cash borrowed under the
credit facility will be sufficient to meet the Company's requirements for at
least the next 24 months. If the College decides to purchase a campus facility,
it may finance the acquisition with indebtedness.

IMPACT OF INFLATION

Inflation has not had a significant impact on the Company's historical
operations.

19
<PAGE> 21

BUSINESS

OVERVIEW

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 who did not attend 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 22%
of the College's current enrollment resides. The College will begin
offering classes at its Prince George's County, Maryland campus in April
1997, and is developing a proposal to establish a tenth campus in
Montgomery County, Maryland. 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 Hanover, Maryland for company employees. The
College also currently offers graduate computer information systems
courses at the Southern Maryland Higher Education Center in California,
Maryland.

- Flexible Scheduling. The College's nine 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. The College offers some courses
in "mini" sessions, which allow students to complete courses on a more
intensive basis in less than a quarter, and has requested authorization
from the District of Columbia Education Licensure Commission to offer
these "mini" sessions on a year-round basis.

- 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

20
<PAGE> 22

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 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.

- Resource Allocation. 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.

BUSINESS STRATEGY

The College seeks to strengthen its position as a leading provider of
business-oriented education for working adults in its region. 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 April 1997 at its first degree-granting campus in Maryland, which is
located in Prince George's County, and is developing a proposal to
establish an additional campus in Montgomery County, Maryland. 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 Distance Education Programs. The College has submitted a proposal
for approval of a distance learning program called "Strayer ONLINE" to
the District of Columbia Education Licensure Commission to give students
greater flexibility in completing their programs. Under the proposal, the
College would increase its online course offerings from selected master's
courses presently offered to include the College's entire curriculum,
subject to the availability of appropriate software for certain courses.
The College is establishing facilities for Strayer ONLINE at a Distance
Learning Center in Lorton, Virginia. The availability of Strayer course
offerings online may allow the College in the future to expand its
student population beyond those geographical areas served by Strayer
campuses.

- Additional Corporate and Government Locations. The College has made
arrangements with certain government and corporate employers to permit
their employees to take a limited number of courses at the employer's
place of business. By requiring these employees to enroll in a diploma or
degree program, the College seeks to increase enrollment in additional
courses at one or more of the College's campus facilities. The College
has established a corporate and governmental outreach department staffed
with six full-time employees to increase the College's presence
throughout its region.

- Expand and Upgrade Curriculum. The College regularly introduces new
programs as well as new course offerings and course upgrades in existing
programs in response to technological innovations and the changing
demands of business, industry and government.

- Expand SEL Program. The College intends to increase 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 fund the expansion
of 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 intends to use a
portion of the proceeds from the Offering to purchase the Alexandria
campus facilities.

21
<PAGE> 23

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 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 and diploma programs, the College
offers classes to non-degree, non-program students wishing to take courses for
personal or professional enrichment.

22
<PAGE> 24

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, program and campus location at the beginning of the 1996 Fall quarter:

COLLEGE ENROLLMENT BY MAJOR, PROGRAM
AND CAMPUS LOCATION -- 1996 FALL QUARTER

<TABLE>
<CAPTION>
CAMPUS
-----------------------------------------------------------------------------------------
WASHINGTON, TAKOMA
MAJOR PROGRAM D.C. PARK ARLINGTON ALEXANDRIA WOODBRIDGE LOUDOUN MANASSAS FREDERICKSBURG TOTAL
- ---------------------- ------- ----------- ------ --------- ---------- ---------- ------- -------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accounting............ AA 47 19 6 12 9 9 8 16 126
BS 138 43 76 69 84 54 83 59 606
MS 26 10 25 11 14 7 9 5 107
Business
Administration...... AA 156 42 33 27 29 33 23 56 399
BS 309 113 201 206 211 179 197 170 1,586
MS 97 51 119 66 62 46 50 60 551
Computer Information
Systems............. * 77 85 36 60 83 43 69 65 518
AA 211 104 55 61 72 52 41 73 669
BS 356 159 282 408 361 259 276 201 2,302
Information Systems... MS 43 21 71 65 82 58 48 43 431
Economics............. AA 3 0 1 0 0 1 0 0 5
BS 13 10 4 7 3 0 0 0 37
General Studies....... AA 27 3 19 15 7 2 6 2 81
Marketing............. AA 14 1 0 0 0 0 2 0 17
Non-Degree/Non-Program** -- 186 113 94 92 40 128 61 23 737
----- --- ----- ----- ----- --- --- --- -----
Total
Enrollment...... 1,703 774 1,022 1,099 1,057 871 873 773 8,172
===== === ===== ===== ===== === === === =====
</TABLE>

- ---------------
* Diploma program.
** 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 years:

DEGREES AND DIPLOMAS CONFERRED
FOR THE YEARS 1992 TO 1996

<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Diploma Program............... 714 826 702 652 368*
Associate's Degrees........... 129 168 217 239 248
Bachelor's Degrees............ 398 453 673 787 823
Master's Degrees.............. 161 193 290 293 278
----- ----- ----- ----- ------
Total.................... 1,402 1,640 1,882 1,971 1,717
===== ===== ===== ===== ======
</TABLE>

- ---------------
* In 1996, the diploma program was expanded from nine months to twelve months.
The change resulted in fewer students completing the program's requirements by
June 30, 1996.

23
<PAGE> 25

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 1997 Winter
quarter:

DISTRIBUTION BY HIGHEST EARNED DEGREE -- 1997 WINTER QUARTER

<TABLE>
<CAPTION>
DEGREES FULL-TIME PART-TIME
------------------------------------------------------- --------- ---------
<S> <C> <C>
Ph.D. ................................................. 18 49
Ed.D. ................................................. 2 6
D.Sc. ................................................. 4 2
J.D. .................................................. 3 9
Master's............................................... 47 173
Bachelor's............................................. -- 21
Other:
D.B.A. .............................................. -- 1
D.C.M. .............................................. -- 1
D.P.A. .............................................. 2 --
Th.D. ............................................... -- 1
--
---
Total........................................ 76 263
== ===
</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 has been accredited by Middle States, an accrediting agency
recognized by the Department of Education, since 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 April 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

24
<PAGE> 26

important attribute of the College. Colleges and universities 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 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 authorized to offer its programs by the D.C. Education
Licensure Commission, the Virginia State Council of Higher Education, and the
Maryland Higher Education Commission. 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 1996 Fall quarter, approximately 64% of the enrollment consisted of
part-time students, approximately 79% attended classes at night or on week-ends,
and approximately 55% were women. The approximate age distribution of the
students was as follows:

<TABLE>
<CAPTION>
PERCENTAGE
AGE OF STUDENTS
------------------------------------------------ -----------
<S> <C>
21 or under..................................... 8%
22 to 29........................................ 31%
30 to 39........................................ 37%
40 to 49........................................ 19%
50 or over...................................... 4%
Unknown......................................... 1%
</TABLE>

At the beginning of the 1996 Fall quarter, approximately 66% of the
College's enrollment consisted of Virginia residents. Maryland residents and
District of Columbia residents accounted for 22% and 12% 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 1996 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 December 31, 1996, the College employed 43 admissions
representatives.

25
<PAGE> 27

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 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 Education 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, 1997, undergraduate, full-time students are
charged at the rate of $170 per credit hour. Undergraduate, part-time students
are charged at the rate of $180 per credit hour. Courses in graduate programs
are charged at the rate of $240 per credit hour. Accordingly, a full-time
student seeking to obtain a bachelor's degree in four years currently would pay
approximately $7,650 per year in tuition. The College implemented tuition
increases of 7.7%, 7.1% and 6.3% in 1994, 1995 and 1996, 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 COLLEGE EDUCATIONAL FOUNDATION

Strayer students are eligible to receive awards from the Strayer College
Educational Foundation (the "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
December 31, 1996, the Foundation has awarded $74,280 in grants and
scholarships. The Foundation is a Selling Stockholder and has advised the
Company that it intends to establish an endowment fund for a scholarship program
with the net proceeds of this Offering.

SEL PROGRAM

In 1995, Strayer began the SEL Program of loans for eligible students as an
alternative to government-sponsored student loans. In 1996, the College
originated 1,263 SEL loans aggregating approximately $3.2 million. 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.

26
<PAGE> 28

The College designed the SEL Program for working adult students. The loans
generally have maturities ranging from one to six years after graduation 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 payments while still enrolled, thereby reducing the
debt they otherwise would assume upon completion of their studies. At December
31, 1996, there were a total of 1,213 loans outstanding with an aggregate loan
balance of approximately $2.9 million and an average individual loan balance of
approximately $2,400.

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

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 1995-96 federal award year was 24.9%. Student
withdrawals have a negative financial and marketing effect on the College. 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 eight
of its 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.

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 1996 alumni
survey, which had an approximately 15% overall response rate, indicated that
only 4% of those responding were unemployed. Approximately 74% of undergraduate
alumni responding indicated that their Strayer education sufficiently prepared
them for their present occupation and approximately 93% of graduate degree
alumni responding 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.

27
<PAGE> 29

COMPETITION

Postsecondary education 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 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

During 1996, the College employed 526 faculty members, of whom 73 were
full-time and 453 were part-time, and 279 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, 193 were employed full-time and 86 were part-time.

LEGAL PROCEEDINGS

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

PROPERTIES

The College leases eight of its nine 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, one has a term that expires in
2002, with two five-year renewal options, one has a term that expires in 1998,
with a three-year renewal option and the third lease has a term that expires in
2000, with three one-year renewal options. With the exception of the Arlington
and Prince George's County leases, the leases contain purchase options. See
"Certain Transac-

28
<PAGE> 30

tions -- Lease of Campus Facilities" and Note 9 to the Company's consolidated
financial statements. The table below sets forth certain information regarding
each of the College's properties at December 31, 1996:

<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF COMPUTER AREA IN
LOCATION CLASSROOMS WORKSTATIONS SQUARE FEET
--------------------------------------- --------- ------------ -----------
<S> <C> <C> <C>
Washington, D.C. ...................... 21 110 33,000
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 33,000
Fredericksburg, Virginia............... 13 62 17,500
Takoma Park (Washington, D.C.)......... 15 48 21,800
Prince George's County, Maryland....... 6 76 6,000
</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 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 three jurisdictions (the District of Columbia, Virginia and
Maryland) 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 establish new campuses. 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 Mr. and Mrs. Ron K. Bailey. 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.

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

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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 or the
Spring of 1997. After conducting a site visit in January 1997, the evaluator
submitted a report recommending that Strayer increase its administrative staff
to accommodate enrollment growth; make changes in faculty appointments,
including awarding tenure to appropriate faculty members, employing more
full-time faculty with doctoral degrees, employing full-time faculty to teach
approximately 60 percent of the classes at all sites, considering faculty rank,
and increasing the faculty role in institutional governance; expand facilities
for libraries, faculty offices, student records, computer laboratories, and
meetings; correct minor errors in the College's catalog; encourage student
participation in the College newspaper; and repair a wheelchair ramp. The
evaluator recommended that the College's authority to operate as a
degree-granting institution in the District of Columbia be renewed for five
years if the College rectified deficiencies in the areas of faculty, physical
plant, and library within six months. The College submitted a response to the
evaluation report on March 13, 1997. In its response, while accepting a number
of the evaluator's recommendations, the College maintained that it was in full
compliance with all of the D.C. Commission's standards for licensure and merited
a permanent license. The D.C. Commission is expected to act on the College's
license renewal application at its meeting on March 27, 1997, prior to the
expiration of the College's license on March 31, 1997.

The College began offering its educational programs in Virginia in 1981.
The Virginia State Council of Higher Education approved the College's first
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. In February 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. The College is preparing to open a campus in Prince
George's County, Maryland, for the 1997 Spring quarter, which begins in April.
MHEC gave the College permission to offer courses at the Computer Sciences
Corporation facilities in Hanover, Maryland, beginning in July 1996, and to
offer the Master of Science in Computer Information Systems at the Southern
Maryland Higher Education Center beginning in the 1996 Fall quarter.

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 HEA,
a recognized accrediting agency must perform regular inspections and reviews of
institutions of higher education, including unannounced site visits to
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, a collegiate accrediting agency recognized by the Department
of Education, accredited the College in 1981 and reaffirmed the College's
accreditation in November 1995. The College is required to submit an interim
status report to Middle States in April 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 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.

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<PAGE> 32

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 enacted in 1996
imposed additional requirements on higher education institutions to collect
information concerning, and to verify the immigration status of, 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 the 1997 Winter quarter, approximately 37.8% of the College's students
participated in one or more of the federally supported student financial aid
programs. A substantial portion (approximately 48% in 1996) 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 from lending institutions subsidized and unsubsidized student loans,
which are guaranteed by the federal government. The obligation to begin repaying
Stafford loans is deferred until six months after the student graduates,
withdraws or ceases to be enrolled on at least a half-time basis. 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 students without demonstrated
financial need or in some cases in addition to a subsidized Stafford loan. The
unsubsidized Stafford loan program now incorporates the former Federal
Supplemental Loans for Students program. In 1996, approximately 41.2% of the
College's revenues were derived from Stafford loans. PLUS Loans are made
available to parents of dependent students and accounted for approximately 1.1%
of the College's revenues in 1996. 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 resources 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 5.6% of the College's revenues in 1996.

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. Tuition
received by the College under these programs accounted for less than 1.0% of the
College's revenues in 1996.

Direct Student Loans. In 1993, Congress enacted the William D. Ford
Federal 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

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<PAGE> 33

beginning in 1994-95. The College was approved to participate in this program
beginning July 1, 1996, and anticipates beginning to make loans under this
program in 1997.

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. An institution must, among
other things, 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. For purposes of the
Title IV Programs, the College and all of its campuses are considered to be a
single "institution" so that Department of Education requirements applicable to
an "institution" are applied to all of the College's campuses in the aggregate
rather than on an individual basis.

The College is currently certified to participate in Title IV Programs. The
HEA requires the Department of Education to review every institution of higher
education for continued participation in Title IV Programs by July 23, 1997, on
a schedule established by the Department. The College submitted its application
for recertification to the Department on March 14, 1997. The timely submission
of the recertification application will allow the College to continue to
participate in Title IV Programs pending the Department's action on the
application. As a result of the Department of Education's recertification
review, if the Department of Education determined that an institution did not
meet all applicable standards, the institution could be recertified for a
limited period of time or placed on provisional certification status or its
certification permitted to expire. Provisional certification does not limit an
institution's access to Title IV Program funds, but does subject the institution
to closer review by the Department of Education and may subject the institution
to summary adverse action if it commits violations of Title IV Program
requirements. Based on its Perkins loan cohort default rate for the most recent
year, the College could be placed on provisional certification status.

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 the 1992 reauthorization of the HEA, 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 and
accrediting agency approval. 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 regulatory standards
in effect at the time of reviews by regulatory authorities and the College's
compliance with those standards may affect the operations of the College and its
ability to participate in Title IV Programs.

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. The current
regulatory scheme may be modified through the reauthorization of the HEA, which
Congress will consider in 1997.

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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
student loan guarantee agencies, also have enforcement authority.

The HEA was most recently reauthorized by the Congress in 1992, at which
time funding for the Title IV Programs was authorized through September 30,
1997, with an automatic one-year extension if the HEA were not reauthorized by
that date. The Congress has commenced the reauthorization process, but the
reauthorization is not expected to be completed until late 1997 or during 1998.
Although there is no present indication that the Congress will decline to
reauthorize the Title IV Programs, at this time it is not possible to predict
the outcome of the reauthorization process. There can be no assurance that
federal funding will continue to be available for any or all Title IV Programs
for proprietary institutions such as the College, that such funding will be
maintained at current levels for any or all such programs, that current
requirements for student and institutional participation will be unchanged, or
that one or more present Title IV Programs will not be replaced by other
programs with materially different student or institutional eligibility
requirements or benefits. An elimination of certain Title IV Programs, a
reduction in federal funding levels of such programs, material changes in the
requirements for participation in such programs, or the substitution of
materially different programs could reduce the ability of certain students to
finance their education, which in turn could lead to lower enrollments at the
College or require the College to increase its reliance upon alternative sources
of student financial aid. Given the significant percentage of the Company's
revenues that are indirectly derived from the Title IV Programs, the loss of or
a significant reduction in Title IV Program funds available to the College's
students could have a material adverse effect on the Company.

In addition to the HEA reauthorization, President Clinton and members of
Congress have proposed various changes in the Internal Revenue Code to assist
students and their parents in meeting the cost of higher education. Among other
changes, the President has proposed the "Hope Scholarship," which would provide
a nonrefundable tax credit of up to $1,500 a year for two years for tuition and
fees of postsecondary education. Students would be required to maintain at least
a "B" average and meet certain other eligibility requirements to qualify for the
second year of the tax credit. Members of Congress and representatives of the
higher education community have expressed some concerns about these proposals,
including the possibility of review of student grade point averages by the
Internal Revenue Service. Congress has commenced consideration of these proposed
changes in the Internal Revenue Code, but is not expected to complete that
consideration until later in 1997. At this time it is not possible to predict
whether Congress will enact any of the proposed tax reforms, to what extent
Congress may modify them in the process of enactment, or to what extent such tax
benefits, if enacted, may be available to students attending proprietary
institutions such as the College.

Administrative Capability

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. To meet the administrative capability
standards, an institution, among other things, must not have cohort default
rates above specified levels, must have various procedures in place for
safeguarding federal funds, must 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. See "Licensing, Accreditation
and Financial Aid Regulation -- Financial Aid Regulation -- Student Loan
Defaults." During the period of provisional certification, the institution must
comply with any additional conditions included in its program participation
agreement. If the Department of

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Education determines that a provisionally certified institution is unable to
meet its responsibilities under its program participation agreement, it may
revoke the institution's certification to participate in Title IV Programs.

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 of Title IV Program funds, under which an
institution requests and receives funding from the Department of Education in
advance based on anticipated needs, to the "reimbursement" system of payment,
under which the institution must disburse funds to eligible students and
document their eligibility for Title IV Program funds before receiving such
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 new loan guarantees to students enrolled at
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.

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. Unger and
Associates, Inc. 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

The HEA and Department of Education regulations prescribe extensive
standards of financial responsibility that institutions such as the College must
satisfy to participate in Title IV Programs. Among these standards 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 also: (i)
demonstrate 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 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 institution's 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

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<PAGE> 36

the fiscal year ended December 31, 1996, the College's "acid test" ratio was
1.69-to-1. The College did not have operating losses in either of its two most
recent fiscal years and had a positive tangible net worth for its latest fiscal
year. 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 submitted
such a letter of credit in the amount of $500,000. An institution will not be
considered to be financially responsible if it exhibits certain characteristics
of poor past performance, including, among other considerations, 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 and 1996, as submitted to the Department of Education, the
College believes it satisfies each of the applicable financial responsibility
standards. In 1996, the Department of Education issued proposed regulations that
would establish new measures of financial responsibility. The Department has
extended the period for comment on the proposed regulations three times because
of concerns expressed by members of the higher education community about the
proposed standards. It is not possible to predict the outcome of this rulemaking
proceeding at this time.

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 federal fiscal years, the institution's 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. The
Department of Education also may initiate a proceeding to limit, suspend or
terminate an institution's participation in the FFEL Program if it has any
combination of an 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 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 an FFEL Program, Direct Loan Program or weighted
average cohort default rate that exceeds 40% for any federal fiscal year.

If an institution's FFEL cohort default rate equals or exceeds 25% in any
of the three most recent federal fiscal years, or if its cohort default rate for
loans under the Perkins program exceeds 15% for any federal award year, the
institution may be placed on provisional certification status. Provisional
certification does not limit an institution's access to Title IV Program funds;
however, an institution with provisional status is under closer review by the
Department of Education and may be subject to summary adverse action if it
commits violations of Title IV Program requirements. The College's cohort
default rates on FFEL Program loans for the 1992, 1993 and 1994 federal fiscal
years, the most recent years for which this information is available, were
10.6%, 16.6% and 16.0%, respectively. The average default rates for proprietary
institutions nationally were 30.2%, 23.9% and 21.1% in fiscal years 1992, 1993
and 1994, respectively. The College's Perkins cohort default rates in federal
award years 1994, 1995, and 1996 were 4.0%, 11.6% and 18.6%, respectively. Thus,
based on its most recent Perkins cohort default rate, the College could be
placed on provisional certification status, which would subject it to closer
review by the Department of Education. If the College were placed on provisional

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certification status for this reason and reduced its Perkins cohort default rate
below 15% in a subsequent year, the College could ask the Department of
Education to remove the provisional status. The College has not made any new
Perkins loans for more than a year, and is in the process of withdrawing
voluntarily from participation in the Perkins program.

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 year. During
1996, the College derived 48% 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 to provide guaranteed student loans 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 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. The SEL Program would provide one such alternative,
but there can be no assurance that the SEL Program could provide loans
sufficient to make up for the loss of Title IV Program funds. 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 those 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

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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 or accreditation by the College or an existing campus, or
the failure of the College or a new campus to obtain state authorization or
accreditation, would render the College ineligible to participate in Title IV
Programs in that state or at that 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 for approval before it awards or disburses Title IV
Program funds to students enrolled at such location. The Department of Education
regulations provide that that determination is based 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 for approval before it awards or disburses Title IV
Program funds to students enrolled at 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 Department of Education 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 may 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

On March 13, 1997, the College submitted a proposed plan for a distance
learning program called "Strayer ONLINE" to the D.C. Education Licensure
Commission. The College expects the D.C. Commission to act on the proposed plan
at its meeting on March 27, 1997. Subject to the D.C. Commission's favorable
action, the College intends to submit the proposed plan to the Virginia State
Council of Higher Education, the Maryland Higher Education Commission, and
Middle States for their approval. Subject to regulatory approvals, the College
intends to offer its existing degree and diploma programs through Strayer

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<PAGE> 39

ONLINE via Internet-based telecommunications instruction, beginning in 1997 with
master's and upper-level undergraduate courses in accounting, business
administration, and computer information systems and expanding to most master's
courses offered by the College by 1999 and most upper-level undergraduate
courses by 2000. Beginning in the 1998 Spring quarter and as appropriate
software becomes available, the College anticipates extending Strayer ONLINE to
most lower level undergraduate courses and to the diploma program. The College
is establishing facilities for Strayer ONLINE at a Distance Learning Center in
Lorton, Virginia. Tuition and other charges for courses offered through Strayer
ONLINE would be the same as for courses on campus. The College anticipates that
the same sources of student financial assistance will be generally available for
students enrolled through Strayer ONLINE as for students enrolled on campus. The
availability of Title IV Program funds to students enrolled through Strayer
ONLINE, however, would be limited in that, among other restrictions, Strayer
will adjust the amount of aid available to students enrolled in Strayer ONLINE
to take into account any significant reductions in the students' cost of
attendance arising from the use of telecommunicated instruction and will limit
the amount of Title IV Program assistance available to students enrolled in the
diploma program to that which is available to students enrolled in
correspondence courses. See "Business -- Business Strategy."

The delivery of educational services, whether through conventional
classroom means or through the use of distance learning technologies, including
courses offered via the Internet, is primarily regulated at the state level. The
D.C. Commission requires that a course or program offered by "correspondence,
extension, telecommunications 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 courses offered by the College through the Internet or other
technology are found to be inferior to those otherwise offered by the College,
or such courses are inconsistent with the objectives and purposes that the
College presented to the D.C. Commission and the D.C. Commission approved, the
D.C. Commission could initiate an adverse action proceeding, up to and including
seeking the termination of the College's license to operate in the District of
Columbia. Virginia requires institutions, including those otherwise authorized
to operate within the State, to obtain approval from the Virginia State Council
of Higher Education before offering any instructional program via
telecommunications at a specific site within the State. Maryland requires
institutions authorized to operate in Maryland to submit a prospectus and
request for approval to offer programs by telecommunications instruction. While
certain states assert the legal right to regulate the provision of
telecommunications instruction to students residing within their respective
jurisdictions even where the offering institution is not physically present
within that state, the Company is unaware of any instances where under such
circumstances an institution has been barred from so operating.

Middle States has adopted guidelines for the incorporation of distance
learning programs within the scope of accreditation, and has submitted the
guidelines to its membership for approval. The College believes that Strayer
ONLINE meets the standards adopted by Middle States. The six regional
accrediting agencies, including Middle States, have informally agreed that they
will not assert authority over the offering of courses via telecommunications
offered by an institution that is not physically present within their geographic
area, but will defer to the authority of the accrediting agency within whose
region the home campus of the institution is located.

The HEA imposes a limit on the amount of correspondence study an
institution may offer and remain an eligible institution. However, the HEA
further states that a student enrolled in a course of instruction that is
offered in whole or in part through telecommunications and which leads to a
recognized associate, bachelor or graduate degree conferred by such institution
is not considered to be enrolled in a correspondence course, unless the total
number of telecommunications and correspondence courses offered by the
institution equals or exceeds fifty percent of the total number of courses
offered by the institution. The HEA also excludes from Title IV Program
participation institutions at which more than one half of the enrolled students
are enrolled in correspondence courses, except that the Secretary of Education
is authorized to waive this limitation at his discretion in the case of colleges
offering two- or four-year programs leading to an associate's or bachelor's
degree. Department of Education regulations grant an automatic waiver where
students enrolling in correspondence courses receive five percent or less of the
total Title IV Program funds received by all students enrolled at the
institution. The HEA defines "telecommunications" as the use of television,
audio, or

38
<PAGE> 40

computer transmission, including open broadcast, closed circuit, cable,
microwave, or satellite, audio conferencing, computer conferencing, or video
cassette or discs. The courses the College will offer through Strayer ONLINE are
offered through "telecommunications" as that term is defined in the HEA. The
College does not anticipate that the number of students enrolled in its diploma
program through Strayer ONLINE will equal or exceed one half of the College's
total enrollment, or that the number of courses offered through Strayer ONLINE
will equal or exceed the total number of courses offered on its campuses. The
College will monitor enrollment in and the offering of courses on Strayer ONLINE
to ensure that the prescribed limits are not exceeded.

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. Middle States
must approve a substantive change in advance in order to include the change in
the institution's accreditation status. The Company does not believe that the
Offering and related transactions require approval from any of these entities.

The HEA provides that an institution which undergoes a change in ownership
resulting in a change of control loses its eligibility to participate in the
Title IV Programs and must apply to the Department of Education in order to
reestablish such eligibility. An institution is ineligible to receive Title IV
Program funds during the period prior to recertification. The HEA further
defines one of the events that would trigger a change in ownership resulting in
a change of control as the transfer of the controlling interest of the stock of
the institution or its parent corporation. For a publicly-traded corporation,
the securities of which are required to be registered under the Exchange Act,
such as the Company, the Department of Education regulations implementing the
HEA define a change in ownership resulting in a change of control as occurring
when a change of control of the corporation takes place that gives rise to the
obligation on the part of the corporation to file a Form 8-K with the SEC
notifying that agency of the change of control. The Company has determined that
the Offering and related transactions will not give rise to an obligation to
file a Form 8-K with the SEC.

Ron K. Bailey currently owns approximately 62.4% of the Company's
outstanding stock jointly with his wife, and after completion of the Offering
will continue to own 54.2% of the outstanding Common Stock (51.0% on a fully
diluted basis) jointly with his wife. If Mr. or Mrs. Bailey were to die, the
surviving spouse would become the sole owner of those shares. The HEA and
Department of Education implementing 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.
However, the Department of Education requires schools to report such events to
the Department of Education for review. 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.

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. After the Company was formed and the initial public offering

39
<PAGE> 41

of its stock was completed, the College timely notified the INS of the change in
ownership, and the INS continued the College's approval to admit foreign
students. The College expects that it will again be required to file a petition
for school approval with the INS within 60 days after the Offering.

If the College underwent a change of control 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 and 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 suspension from Title IV Programs and the necessity of
obtaining regulatory approvals in connection with a change of control may
materially limit the College's flexibility in future financings or acquisition
transactions.

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 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.

40
<PAGE> 42

MANAGEMENT AND DIRECTORS

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the executive
officers and directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------------------- --- -----------------------------------
<S> <C> <C>
Ron K. Bailey...................... 56 President, Treasurer and Director
Harry T. Wilkins................... 40 Chief Financial Officer
Stanley G. Elmore.................. 55 Chairman of the Board of Directors
Todd A. Milano..................... 44 Director
Jennie D. Seaton................... 67 Director
Roland Carey....................... 57 Director
Donald T. Benson................... 53 Director
G. Thomas Waite, III............... 45 Director
Donald Stoddard.................... 60 Director
Charlotte Beason................... 49 Director
</TABLE>

Ron K. Bailey is the President and Treasurer and has been a director of the
Company since its formation. 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 a director of the Company since July 1996. Mr.
Elmore has been the Chairman of the Board of Trustees of the College since 1989.
Mr. Elmore serves as Projects and Programs Manager, Citibank Mid-Atlantic, a
position he has held for more than five years.

Todd A. Milano has been a director of the Company since July 1996. 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 a director of the Company since July 1996.
Dr. Seaton has been a member of the Board of Trustees of the College since 1990.
Dr. Seaton is retired and was an Assistant Dean of Virginia Commonwealth
University from 1975 to 1994.

Roland Carey has been a director of the Company since July 1996. 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 a director of the Company since July 1996. 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 Connecticut General Insurance Corp. (CIGNA).

G. Thomas Waite, III has been a director of the Company since July 1996.
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

41
<PAGE> 43

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 a director of the Company since July 1996. 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 a director of the Company since July 1996.
Dr. Beason has been a member of the Board of Trustees of the College since 1995.
Dr. Beason is a Nurse at the U.S. Department of Veterans Affairs/Health Care
Reform Office, a position she has held for more than five years.

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., 42, 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, 54, is the Director of Facilities of the College, a
position he has held since 1988.

Robert E. Farmer, 58, 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. Mr. Farmer is a certified Professional in Human
Resources (PHR).

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

John Tucker, 56, is the College's Director of Distance Learning, a position
he has held since 1995. Mr. Tucker has been on the faculty of the College as an
Adjunct Professor since 1974 and was a director of systems engineering with the
Internal Revenue Service from 1988 to 1995. He is a certified computer
professional and has an extensive background as an educator in distance
learning.

David J. Spille, 30, is the Manager of Investor Relations, a position he
has held since February 1997. Prior to his employment at Strayer, Mr. Spille was
an Analyst at the Nasdaq Stock Market, Inc. from 1994 to 1997 and a Business
Analyst at E-Systems Incorporated from 1990 to 1994.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established an Audit Committee, an Executive
Committee and a Compensation Committee.

42
<PAGE> 44

Audit Committee. The Audit Committee consists of non-management directors
and makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans and
results of the audit engagement, approves professional services provided by the
independent public accountants and reviews the adequacy of the Company's
internal accounting controls.

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

Compensation Committee. The Compensation Committee consists of three
non-management directors. The Compensation Committee determines the compensation
of the Company's executive officers, subject to the provisions of any employment
agreements, and administers the Company's 1996 Stock Option Plan.

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 Company'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>
LONG-TERM
COMPENSATION AWARDS
---------------------------------
ANNUAL COMPENSATION SECURITIES
-------------------------------- UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS OPTIONS/SAR'S COMPENSATION(2)
- ------------------------------ ----- -------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Ron K. Bailey................. 1995 $150,000 $6,175,000(1) -- $ 3,181
President 1996 $150,000 -- -- $ 3,138
</TABLE>

- ---------------
(1) The bonus was withheld for payments by Mr. Bailey in respect of income taxes
on undistributed S Corporation income of the College. 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 and $3,000 in matching contributions made by the College
to the College's 401(k) plan for Mr. Bailey in 1995 and 1996, respectively,
and (ii) $138 in premiums paid by the College for life insurance for Mr.
Bailey in each of 1995 and 1996.

EXECUTIVE EMPLOYMENT AGREEMENTS

Mr. Bailey and the College have entered into an Employment Agreement which
provides that Mr. Bailey will serve as President of the College. For his
services, Mr. Bailey receives an 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
agreement contains a covenant restricting Mr. Bailey from competing with the
College for three years after the termination of employment.

The College also has entered into an employment agreement with Mr. Harry T.
Wilkins, Chief Financial Officer of the Company, which contains a covenant
restricting Mr. Wilkins from competing with the College for three years after
the termination of his employment.

43
<PAGE> 45

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 of Common Stock 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 administers the Plan and grants options to purchase
shares of Common Stock. Immediately prior to the closing of the Company's
initial public offering, the College granted options for 663,136 shares of
Common Stock at the initial public offering price, of which options for 646,674
shares are outstanding as of March 18, 1997. All such options 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. These 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 of Common Stock 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.

Each non-employee director (an "Eligible Director") at the time of the
initial public offering was 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 had served as a trustee of the College. 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.

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 of
Common Stock 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.

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<PAGE> 46

The Board of Directors may amend the Plan with respect to shares of Common
Stock 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, 1996 were $119,000.

45
<PAGE> 47

CERTAIN TRANSACTIONS

LEASE OF CAMPUS FACILITIES

The Company has long-term noncancelable operating leases for eight of its
various campus locations. The rents on these leases are subject to an annual
increase based on a stipulated price index. Of the eight campus locations, five
of the campuses, including the Washington, D.C. campuses and three of the
Virginia campuses, were leased from corporations which are wholly-owned by Mr.
Bailey, the Company's President and majority stockholder. Rent paid to Mr.
Bailey under these five operating leases for the years ended December 31, 1994,
1995 and 1996 was $1,339,000, $1,896,000 and $2,279,000, respectively. Future
minimum rental commitments for all of the Company's eight leases and the five
campuses leased from Mr. Bailey as of December 31, 1996 was as follows (in
thousands):

<TABLE>
<CAPTION>
AMOUNT PAYABLE TO AN
TOTAL LEASE AFFILIATE OF MR. BAILEY
COMMITMENTS INCLUDED IN TOTAL
----------- -----------------------
<S> <C> <C>
1997............................................... $ 3,153 $ 2,126
1998............................................... 3,024 2,126
1999............................................... 2,758 2,126
2000............................................... 2,750 2,126
2001............................................... 2,648 2,126
2002............................................... 2,381 2,126
Thereafter......................................... 7,894 7,264
------- -------
$24,608 $20,020
======= =======
</TABLE>

Each of the five leases with Mr. Bailey has a 10-year term expiring in May
2006. The Company has the option under each such lease to purchase at any time
during the term of the lease the related campus facility at its discretion at
the fair market value of such facility as determined by independent appraisers.

The Company may lease additional campus facilities from entities owned or
controlled by Mr. Bailey. Any such leases will have market terms as determined
by an independent appraiser and be subject to the approval by a majority of
independent directors.

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 $257,000 for computer equipment purchasing and related services in
1996. 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, as well as the services
related to Title IV Programs, are performed by employees of the Company. The
College provided PRK office space on a rent-free basis in 1996 through May 15,
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"). Prior to December 31, 1996, eighty percent of the CTI
common stock was owned by children of Ron K. Bailey, President and a director of
the Company. The College paid CTI approximately $199,000 for its services in
1996. Management believes that CTI provided such services to the College on
terms at least as favorable to the College as the College could obtain

46
<PAGE> 48

from unaffiliated parties. The Company believes that the instruction provided by
CTI is not competitive with the current programs of the College.

REORGANIZATION TRANSACTIONS

On July 30, 1996, the Company completed an initial public offering of its
common stock. The Company sold 3,450,000 shares in the offering at a price of
$10 per share. Net proceeds to the Company were $31,313,000. Prior to the
closing of the offering, the Company exchanged 5,999,000 shares of its common
stock for 100% of the outstanding common stock of the College, which was held
jointly by Mr. and Mrs. Ron K. Bailey, in their capacity as the S Corporation
Stockholder. Approximately $19,838,000 of the net proceeds of the offering were
paid to the Baileys as a distribution of earnings on which they had previously
paid income taxes during the period the College was an S Corporation.

Contemporaneously with the closing of the initial public offering, the
Company acquired ELP at a purchase price of $1,060,000, ELP's net book value.
ELP was wholly owned by Mr. Ron K. Bailey, the Company's President and a
director of the Company.

47
<PAGE> 49

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the ownership
of Common Stock as of March 15, 1997, by (i) each person known by the Company to
be the beneficial owner of more than five percent (5%) of the outstanding shares
of Common Stock, (ii) each director of the Company, (iii) each Selling
Stockholder, and (iv) all executive officers and directors as a group. The
information presented in the table is based upon the most recent filings with
the Securities and Exchange Commission by such persons or upon information
otherwise provided by such persons to the Company.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
OFFERING NUMBER OF OWNED AFTER OFFERING
---------------------- SHARES ----------------------
PERCENT TO BE PERCENT
NAMES OF BENEFICIAL OWNERS(1) NUMBER OF CLASS SOLD NUMBER OF CLASS
- --------------------------------------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Ron K. Bailey and Beverly W. Bailey.... 5,900,000 62.4% 450,000 5,450,000 54.2%
Putnam Investments, Inc.(2)
One Post Office Square
Boston, Massachusetts 02109............ 975,679 10.3 -- 975,679 9.7
Strayer College Educational Foundation
3045 Columbia Pike
Arlington, Virginia 22204.............. 100,000 1.1 100,000 0 0
Stanley G. Elmore...................... 0 0 -- 0 0
Todd A. Milano......................... 4,540 * -- 4,540 *
Jennie D. Seaton....................... 0 0 -- 0 0
Roland Carey........................... 0 0 -- 0 0
Donald T. Benson....................... 600 * -- 600 *
G. Thomas Waite, III................... 0 0 -- 0 0
Donald Stoddard........................ 300 * -- 300 *
Charlotte Beason....................... 0 0 -- 0 0
All directors and executive officers as
a group (10 persons)................. 5,905,440 62.5% 450,000 5,455,440 54.3%
</TABLE>

- ---------------
* Less than one percent

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options or warrants currently exercisable or exercisable within 60 days
are deemed outstanding for purposes of computing the percentage ownership of
the person holding such option or warrant but are not deemed outstanding for
purposes of computing the percentage ownership of any other person. Except
where indicated otherwise, and subject to community property laws where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.

(2) Based on a Schedule 13G filed with the Securities and Exchange Commission on
January 31, 1997. These securities are owned by various institutional
investors that are clients of investment adviser subsidiaries of Putnam
Investments, Inc. ("PI"), a wholly-owned subsidiary of Marsh & McClennan
Companies, Inc. ("M&MC"). For purposes of reporting requirements of the
Securities Exchange Act of 1934, PI and M&MC are each deemed to be
beneficial owners of these securities; however, each of PI and M&MC
expressly disclaims that beneficial ownership.

48
<PAGE> 50

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 9,450,000 shares of Common Stock and no shares of
Preferred Stock outstanding. Upon completion of the Offering, there will be
10,050,000 shares of Common Stock outstanding, plus options to acquire (as of
March 18, 1996) up to 646,674 shares of Common Stock.

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.

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

49
<PAGE> 51

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 undertaking 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 Stock
Transfer & Trust Company.

50
<PAGE> 52

SHARES ELIGIBLE FOR FUTURE SALE

The Company's Common Stock is traded on the Nasdaq and the shares of Common
Stock offered hereby will be eligible for trading on the Nasdaq.

Upon completion of the Offering, the Company will have 10,050,000 shares of
Common Stock outstanding (10,222,500 if the Underwriters' over-allotment option
is exercised in full), excluding 646,674 shares issuable upon exercise of
options held by employees of the Company as of March 18, 1997. Of these shares
of Common Stock, 4,700,000 shares of Common Stock may be resold without
registration under the Securities Act (except by affiliates of the Company). The
Company and Mr. and Mrs. Ron K. Bailey have agreed that, for a period of 180
days from the date of this Prospectus, they will not, without the prior written
consent of Smith Barney Inc., offer, sell, contract to sell or otherwise dispose
of any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock (subject, in the case of the Company, to an
exception for the exercise of options granted under the Company's stock option
plan). But for these agreements, all but 1,000 of the outstanding shares of
Common Stock immediately prior to the closing of the Offering would be eligible
for sale, subject to the volume resale, manner of sale and notice limitations of
Rule 144 or the provisions of Rule 144A under the Securities Act.

In general, under Rule 144 as currently in effect, an "affiliate" is
entitled to sell, within any three-month period, that number of shares that does
not exceed the greater of 1% of the outstanding shares or the average weekly
trading volume of the then outstanding shares during the four calendar weeks
preceding such sale. As defined in Rule 144, an "affiliate" of an issuer is a
person that directly or indirectly controls, or is controlled by, or is under
common control with such issuer. A person who is not an affiliate of the issuer
for at least 90 days and who has beneficially owned such shares for a period
(the "Holding Period") of at least three years is entitled under Rule 144(k)
under the Securities Act to sell such shares without regard to the volume or
other resale requirements described above. An amendment to Rule 144(k), which
becomes effective on April 29, 1997, will reduce the Holding Period to at least
two years. 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.

No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of shares of Common Stock for future
sale, will have on the market price of the Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect prevailing market prices of the Common
Stock.

51
<PAGE> 53

UNDERWRITING

Subject to the terms and conditions stated in the Underwriting Agreement
dated the date hereof, each Underwriter named below has severally agreed to
purchase, and the Company and the Selling Stockholders have agreed to sell to
each Underwriter, the number of shares of Common Stock set forth opposite the
name of such Underwriter.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------------ ---------
<S> <C>
Smith Barney Inc. ................................................
Legg Mason Wood Walker, Incorporated..............................

---------
Total................................................... 1,150,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock are
subject to approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all shares of
Common Stock offered hereby (other than those covered by the over-allotment
option described below) if any such shares are taken.

The Underwriters propose to offer part of the shares of Common Stock
directly to the public at the Price to Public set forth on the cover page of
this Prospectus and part of the shares to certain dealers at a price which
represents a concession not in excess of $ per share under the public
offering price. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After
the initial public offering of the shares to the public, the public offering
price and such concessions may be changed by the Underwriters.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 172,500 additional
shares of Common Stock at the Price to Public set forth on the cover page of
this Prospectus minus the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the offering of the shares offered
hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.

The Company and Mr. and Mrs. Ron K. Bailey have agreed that, for a period
of 180 days from the date of this Prospectus, they will not, without the prior
written consent of Smith Barney Inc., offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (subject, in the case of the
Company, to an exception for the exercise of options granted under the Company's
stock option plan).

The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids for and purchases of the Common Stock so long as the
stabilizing bids do not exceed a specified

52
<PAGE> 54

maximum. Syndicate covering transactions involve purchases of the Common Stock
in the open market in order to cover syndicate short positions. Penalty bids
permit the Underwriters to reclaim a selling concession from a syndicate member
when the shares of Common Stock originally sold by such syndicate member are
purchased in a stabilizing transaction or syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the Nasdaq or otherwise and, if commenced,
may be discontinued at any time.

Legg Mason Wood Walker, Incorporated has performed and may continue to
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 Dow, Lohnes &
Albertson, PLLC, Washington, D.C.

EXPERTS

The consolidated balance sheets of Strayer Education, Inc. as of December
31, 1996 and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996, included in this Prospectus, have been included herein
in reliance upon the report of Coopers & Lybrand L.L.P., independent
accountants, given upon the authority of that firm as experts in accounting and
auditing.

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. 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 Securities and Exchange 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 from the Public Reference Section of the Securities and
Exchange Commission, maintained by the Securities and Exchange 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 Securities and Exchange
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 Securities and Exchange
Commission.

53
<PAGE> 55

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Strayer Education, Inc.
Report of Independent Accountants................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996........................ F-3
Consolidated Statements of Income for each of the three years in the period ended
December 31, 1996................................................................ F-4
Consolidated Statements of Stockholders' Equity for each of the three years in
the period ended December 31, 1996.................................................. F-5
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1996.......................................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>

F-1
<PAGE> 56

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheets of Strayer
Education, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
December 31, 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Strayer
Education, Inc. and subsidiaries as of December 31, 1995 and December 31, 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.

Coopers & Lybrand L.L.P.
Washington, D.C.
January 31, 1997

F-2
<PAGE> 57

STRAYER EDUCATION, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 8,992 $11,777
Marketable securities available for sale, at market.................... 498 5,057
Short-term investments -- restricted................................... 720 807
Tuition receivable, net of allowances for doubtful accounts of $155 and
$164, respectively.................................................. 7,873 8,923
Inventories............................................................ 725 923
Other current assets................................................... 58 309
------- -------
Total current assets........................................... 18,866 27,796
Student loans receivable, net of allowances for losses................... 932 2,799
Property and equipment, net.............................................. 2,874 7,063
Investments in marketable securities available for sale, at market....... 3,134 10,070
Other assets............................................................. 72 94
------- -------
Total assets................................................... $25,878 $47,822
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................................. $ 360 $ 332
Accrued expenses....................................................... 542 710
Unearned tuition....................................................... 9,504 11,150
Other current liabilities.............................................. 133 30
------- -------
Total current liabilities...................................... 10,539 12,222
Deferred income taxes.................................................... -- 189
------- -------
Total liabilities.............................................. 10,539 12,411
------- -------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized in 1996,
no shares issued or outstanding..................................... -- --
Common stock:
1995 -- Par value $10; 500 shares authorized; 375.5 shares issued
and outstanding.................................................... 4 --
1996 -- Par value $.01; 20,000,000 shares authorized; 9,450,000
shares issued and outstanding...................................... -- 95
Additional paid-in capital............................................. 2,100 31,192
Retained earnings...................................................... 13,077 3,893
Net unrealized gains on investments, net of deferred income taxes of
$152 in 1996........................................................ 158 231
------- -------
Total stockholders' equity..................................... 15,339 35,411
------- -------
Total liabilities and stockholders' equity..................... $25,878 $47,822
======= =======
</TABLE>

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

F-3
<PAGE> 58

STRAYER EDUCATION, INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Revenues:
Tuition..................................................... $33,238 $36,934 $42,775
Fees and other.............................................. 1,019 1,262 2,230
------- ------- -------
34,257 38,196 45,005
------- ------- -------
Costs and Expenses:
Instruction and educational support......................... 14,740 16,168 17,808
Selling and promotion....................................... 3,667 4,281 4,457
General and administration.................................. 10,648 11,571 6,749
------- ------- -------
29,055 32,020 29,014
------- ------- -------
Income from operations...................................... 5,202 6,176 15,991
Investment and other income................................... 350 875 1,061
------- ------- -------
Income before taxes......................................... 5,552 7,051 17,052
Provision for income taxes.................................... -- -- 2,740
------- ------- -------
Net income.................................................. $ 5,552 $ 7,051 $14,312
======= ======= =======
PRO FORMA INFORMATION:
Income before income taxes.................................. $17,052
Income taxes................................................ 6,649
-------
Net income.................................................. $10,403
=======
Net income per share........................................ $ 1.24
=======
Weighted average shares outstanding......................... 8,410
=======
</TABLE>

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

F-4
<PAGE> 59

STRAYER EDUCATION, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK ADDITIONAL GAINS
-------------------- PAID-IN RETAINED (LOSSES) ON
SHARES AMOUNT CAPITAL EARNINGS INVESTMENTS TOTAL
----------- ------ ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
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)
Capital contributions by
stockholder in
connection with
formation of ELP........ -- -- 2,100 -- -- 2,100
Net unrealized gains on
investments............. -- -- -- -- 201 201
Net income................. -- -- -- 7,051 -- 7,051
----------- --- ------- -------- ----- --------
Balance, December 31, 1995... 375.5 4 2,100 13,077 158 15,339
Formation of Strayer
Education, Inc.......... 1,000 -- 1 -- -- 1
Exchange of Strayer
Education, Inc. common
stock for Strayer
College, Inc. common
stock................... 5,998,624.5 56 (56) -- -- --
Proceeds from sale of
common stock, net of
offering expenses of
$3,187.................. 3,450,000 35 31,278 -- -- 31,313
Payment to stockholder for
acquisition of ELP...... -- -- (943) (117) -- (1,060)
Distributions to
stockholders............ -- -- (1,188) (22,788) -- (23,976)
Cash dividends ($.0625 per
share).................. -- -- -- (591) -- (591)
Net unrealized gains on
investments............. -- -- -- -- 73 73
Net income................. -- -- -- 14,312 -- 14,312
----------- --- ------- -------- ----- --------
Balance, December 31, 1996... 9,450,000 $ 95 $ 31,192 $ 3,893 $ 231 $ 35,411
=========== === ======= ======== ===== ========
</TABLE>

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

F-5
<PAGE> 60

STRAYER EDUCATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 5,552 $ 7,051 $14,312
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization............................ 448 688 1,021
Provision for student loan losses........................ -- 49 205
Deferred income taxes.................................... -- -- (75)
Changes in assets and liabilities:
Short-term investments -- restricted..................... -- (317) (87)
Tuition receivable, net.................................. 2,230 940 (1,050)
Inventories.............................................. 13 (179) (198)
Other assets............................................. (65) 167 (161)
Trade accounts payable................................... (18) (220) (28)
Accrued expenses......................................... 153 83 167
Unearned tuition......................................... 776 113 1,646
Other current liabilities................................ (14) 75 (103)
Student loans originated or acquired........................ -- (1,481) (3,314)
Collections on student loans receivable..................... -- 500 1,030
Proceeds from sale of loans................................. -- -- 212
------- ------- --------
Net cash provided by operating activities........... 9,075 7,469 13,577
------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment......................... (1,500) (1,162) (5,208)
Purchases of marketable securities.......................... (6,586) (7,993) (16,640)
Maturities of marketable securities......................... 5,238 6,386 5,370
Other....................................................... 8 (22) --
------- ------- --------
Net cash used in investing activities .............. (2,840) (2,791) (16,478)
------- ------- --------
Cash flows from financing activities:
Distributions to stockholders............................... (2,800) (3,350) (23,976)
Dividends paid.............................................. -- -- (591)
Proceeds from sale of common stock and
additional capital contributions by ELP stockholder...... -- 2,100 31,313
Acquisition of ELP.......................................... -- -- (1,060)
Other....................................................... (62) -- --
------- ------- --------
Net cash provided by (used in) financing
activities........................................ (2,862) (1,250) 5,686
------- ------- --------
Net increase in cash and cash requirements.......... 3,373 3,428 2,785
Cash and cash equivalents -- beginning of period.............. 2,191 5,564 8,992
------- ------- --------
Cash and cash equivalents -- end of period.................... $ 5,564 $ 8,992 $11,777
======= ======= ========
</TABLE>

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

F-6
<PAGE> 61

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Strayer Education, Inc. (the 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 commenced operations on July 25, 1996.

On July 30, 1996, the Company completed an initial public offering of its
common stock. The Company sold 3,450,000 shares in the offering at a price of
$10 per share. Net proceeds to the Company were $31,313,000. Prior to the
closing of the offering, the Company exchanged 5,999,000 shares of its common
stock for 100% of the outstanding common stock of Strayer College, Inc. (the
College). Approximately $19,838,000 of the net proceeds of the offering were
paid to the stockholders of the College as a distribution of earnings on which
the stockholders had previously paid income taxes during the period the College
was an S Corporation.

Contemporaneously with the closing of the initial public offering, the
Company acquired Education Loan Processing, Inc. (ELP) at a purchase price of
$1,060,000, ELP's net book value. ELP was incorporated in December 1994 and
began operations in January 1995. ELP was wholly owned by a stockholder of the
Company.

Under generally accepted accounting principles, the College's and ELP's
bases in their assets and liabilities were carried over to the Company and the
operations of the College, ELP and the Company were retroactively combined in a
manner similar to a pooling of interest, because these acquisitions were
combinations of entities under common control. All significant intercompany
accounts and transactions have been eliminated.

Consistent with the financial statements included in the Company's
prospectus and the reorganization of the Company in connection with the
completion of the initial public offering, the 1994 and 1995 financial
statements are presented on a combined basis and the 1996 financial statements
are presented on a consolidated basis. The accompanying 1996 financial
statements include the accounts of the Company, the College and ELP,
collectively referred to herein as the "Company" or "Companies."

2. NATURE OF OPERATIONS

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.

ELP is a finance company that purchases and services student loans,
principally for the College. For purposes of the consolidated 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.

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 place their cash and temporary cash investments with
high quality credit institutions. The Companies consider all highly liquid
instruments purchased with an original maturity of three months or less to be
cash equivalents.

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.

F-7
<PAGE> 62

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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 with
payments more than 120 days past due is written off against the allowance.

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.

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.

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 40 years. Depreciation amounted to $448,000, $688,000
and $1,021,000 for the years ended December 31, 1994, 1995 and 1996,
respectively.

Income Taxes

For the years ended December 31, 1994 and 1995, the financial statements of
the Companies do not include a provision for income taxes because the taxable
income of the College and ELP was included in the income tax returns of the
stockholders under the S Corporation elections.

In connection with the formation of Strayer Education, Inc., the initial
public offering of the Company's common stock, and the acquisition of the
College and ELP by Strayer Education, Inc., effective July 25, 1996, the College
and ELP are no longer treated as S Corporations for tax purposes. The Companies
now provide for deferred income taxes 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.

F-8
<PAGE> 63

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pro Forma Income Per Share

Pro forma weighted average shares outstanding reflect the acquisition of
the College by the Company in exchange for 5,999,000 shares of common stock, as
if it had occurred on January 1, 1996. Subsequent to the closing of the initial
public offering, the Company made a distribution to the stockholders of the
College in respect of earnings previously subject to income tax during the
College's period as an S Corporation (the "S Corp. Distribution"). As a result,
pro forma weighted average shares outstanding also give effect to the increase
in the number of shares which, when multiplied by the net per share proceeds of
the offering, would have been necessary to fund distributions to the
stockholders, including the S Corp. Distribution, during the 12 months ended
July 1996, to the extent that such distributions exceeded net income during the
same period. Fully diluted income per share was not significantly different from
the primary amount. Historical net income per share is presented in Note 11.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128). FAS
128 simplifies the existing earnings per share (EPS) computations under
Accounting Principles Board Opinion No. 15, "Earnings Per Share," revises
disclosure requirements, and increases the comparability of EPS data on an
international basis. In simplifying the EPS computations, the presentation of
primary EPS is replaced with basic EPS, with the principal difference being that
common stock equivalents are not considered in computing basic EPS. In addition,
FAS 128 requires dual presentation of basic and diluted EPS. FAS 128 is
effective for financial statements issued for periods ending after December 15,
1997. The Company's pro forma basic and diluted EPS under FAS 128 would have
been $1.26 and $1.23, respectively.

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.

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.

Marketable Securities

The cost and market value for each class of investments at December 31,
1995 and 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
1995
-------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
------- ---------- ---------- -------
<S> <C> <C> <C> <C>
U.S. Government obligations..................... $ 2,499 $ 80 $ -- $ 2,579
Equity securities............................... 975 78 -- 1,053
------ ---- ----- ------
Total................................. $ 3,474 $158 $ -- $ 3,632
====== ==== ===== ======
</TABLE>

F-9
<PAGE> 64

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1996
-------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Certificates of deposit and money market
funds......................................... $ 632 $ -- $ -- $ 632
U.S. Government obligations..................... 10,416 137 -- 10,553
Equity securities............................... 3,695 247 -- 3,942
------- ---- ------ -------
Total................................. $14,743 $384 $ -- $15,127
======= ==== ====== =======
</TABLE>

The contractual maturities of U.S. Government obligations at December 31,
1996 are as follows (in thousands):

<TABLE>
<CAPTION>
MARKET
COST VALUE
-------- -------
<S> <C> <C>
Due in one year or less.................................. $ 3,930 $ 3,959
Due after one year through five years.................... 5,144 5,204
Due after five years through 10 years.................... 1,342 1,390
------- -------
Total.......................................... $ 10,416 $10,553
======= =======
</TABLE>

5. PROPERTY AND EQUIPMENT

The composition of property and equipment as of December 31, 1995 and 1996
is as follows (in thousands):

<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
Land...................................................... $ -- $ 800
Buildings................................................. -- 2,319
Furniture and equipment................................... 3,910 5,321
Leasehold improvements.................................... 1,092 1,576
Vehicles.................................................. 63 52
------ -------
5,065 10,068
Less accumulated depreciation........................ 2,191 3,005
------ -------
$2,874 $ 7,063
====== =======
</TABLE>

6. STUDENT LOANS RECEIVABLE

Student loans receivable as of December 31, 1995 and 1996 are as follows
(in thousands):

<TABLE>
<CAPTION>
1995 1996
---- ------
<S> <C> <C>
Student loans receivable outstanding, including accrued
interest.................................................. $981 $2,946
Allowance for loan losses................................... (49) (147)
---- ------
Student loans receivable, net.......................... $932 $2,799
==== ======
</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.

F-10
<PAGE> 65

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Annual principal payments due under the student loans outstanding at
December 31, 1996 are as follows (in thousands):

<TABLE>
<S> <C>
1997.............................................. $ 805
1998.............................................. 568
1999.............................................. 443
2000.............................................. 321
2001.............................................. 252
Thereafter........................................ 557
------
Total................................... $2,946
======
</TABLE>

7. STOCK OPTION PLAN

In July 1996, the Company set aside 1,000,000 shares of common stock for
shares to be issued under the Company's 1996 Stock Option Plan (the Plan) that
provided for the grant of options intended to qualify as incentive stock
options, and provided for the grant of non-qualifying options to directors and
employees of the Company. Options may be granted to eligible employees of the
Companies at the discretion of the Board of Directors, at option prices based on
the fair market value of the shares at the date of grant. Vesting provisions are
at the discretion of the Board of Directors.

On July 24, 1996, the Board of Directors granted options to acquire 663,136
shares of stock at the initial offering price of $10.00 per share to all
full-time employees with at least one year of service, and to all members of the
Board of Directors. The options vest in three equal annual installments
beginning on July 25, 1997. At December 31, 1996, the total number of stock
options outstanding, after forfeitures, was 657,250, all of which expire on July
25, 2001.

The Company accounts for the fair value of its stock options granted to
employees in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly, no compensation expense
has been recognized for the Plan, since the exercise price of the options was
equal to the fair value of the underlying common stock on the date of grant. Had
compensation expense been determined based on the fair value of the options at
the grant dates consistent with that method of accounting under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," the Company's pro forma net income and net income per share for
the year ended December 31, 1996 would have been decreased as indicated below
(in thousands):

<TABLE>
<S> <C>
Net income:
As reported...................................................... $10,403
Pro forma........................................................ $10,204
Net income per common share:
As reported...................................................... $ 1.24
Pro forma........................................................ $ 1.21
</TABLE>

The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model using the following assumptions for grants
during the year ended December 31, 1996: fair value at date of grant of $3.40
per share; dividend yield of 1.0%; expected volatility of 35%; risk-free
interest rate of 6.52%; expected term of 4 years; and remaining contractual life
of the options of 4.58 years.

8. PROFIT SHARING PLAN

The College has a 401(k) profit sharing trust covering all eligible
employees of the College. Participants may defer a percentage of their salaries
or make contributions up to 10% of their total compensation.

F-11
<PAGE> 66

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Employee contributions are voluntary. Discretionary contributions are made by
the College in the fourth quarter of each year, and were $88,000, $94,000 and
$119,000 for the years ended December 31, 1994, 1995 and 1996, respectively.

9. COMMITMENTS AND CONTINGENCIES

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 will
not have a material adverse effect on the Companies' financial position, results
of operations or cash flows.

The College has long-term noncancelable operating leases for eight of its
nine campuses and other administrative locations. ELP has a two-year
noncancelable operating lease for office space. Rent expense was $3,309,000,
$3,227,000 and $3,371,000 for the years ended December 31, 1994, 1995 and 1996,
respectively. The College has the option to buy certain of the 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 the
President and a majority stockholder of the Company. Rent paid to the
stockholder was $1,339,000, $1,896,000 and $2,279,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.

The rents on these leases are subject to an annual increase based on a
stipulated price index. The minimum rental commitments for the Companies as of
December 31, 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
TOTAL AMOUNT
PAYABLE TO
STOCKHOLDER
TOTAL INCLUDED IN TOTAL
------- -----------------
<S> <C> <C>
1997............................................... $ 3,153 $ 2,126
1998............................................... 3,024 2,126
1999............................................... 2,758 2,126
2000............................................... 2,750 2,126
2001............................................... 2,648 2,126
2002............................................... 2,381 2,126
Thereafter......................................... 7,894 7,264
------- -------
$24,608 $20,020
======= =======
</TABLE>

10. INCOME TAXES

The income tax provision for the year ended December 31, 1996 is summarized
below (in thousands). There was no income tax provision in 1994 or 1995 due to
the S Corporation status of the College and ELP during those years.

<TABLE>
<S> <C>
Current:
Federal........................................... $2,088
State............................................. 727
------
2,815
------
Deferred:
Federal........................................... (61)
State............................................. (14)
------
(75)
------
$2,740
======
</TABLE>

F-12
<PAGE> 67

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of the principal temporary differences that give rise to
the Companies' deferred tax liability are as follows (in thousands):

<TABLE>
<S> <C>
Tuition receivable and student loans................................. $ 112
Property and equipment............................................... (37)
Unrealized gains on marketable securities............................ (152)
-----
Net deferred tax liability........................................... $ (77)
=====
</TABLE>

A reconciliation between the Companies' statutory tax rate and the
effective tax rate for the year ended December 31, 1996 is as follows:

<TABLE>
<S> <C>
Statutory federal rate................................................. 35%
Income attributable to period during which the College and ELP were S
Corporations......................................................... (24%)
State income taxes, net of federal benefits............................ 5%
---
Effective tax rate for year ended December 31, 1996.................... 16%
===
</TABLE>

Cash payments for income taxes were $2,809,000 in 1996.

Pro forma income taxes reflect the application of statutory corporate
income tax rates to the net income of the College and ELP as if the termination
of the S Corporation status of the Companies had occurred on January 1, 1996.

The components of the pro forma income tax provision as of December 31,
1996 are as follows (in thousands):

<TABLE>
<S> <C>
Current
Federal........................................... $5,526
State............................................. 1,198
------
6,724
Deferred............................................ (75)
------
$6,649
======
</TABLE>

The effective pro forma income tax rate differs from the 35% statutory
federal rate principally as a result of state income taxes.

11. HISTORICAL INCOME PER SHARE

Historical income per share, computed on the basis of the weighted average
number of shares and share equivalents outstanding after giving effect to the
merger of the College and the Company, are as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income per share........................... $ .93 $ 1.18 $ 1.88
Weighted average shares outstanding............ 6,000,000 6,000,000 7,592,806
</TABLE>

Fully diluted income per share was not significantly different from the
primary amounts.

12. SUBSEQUENT EVENTS

The Company's Board of Directors declared a dividend of $.0625 per share to
stockholders of record as of January 3, 1997, and this dividend was paid on
January 17, 1997.

F-13
<PAGE> 68

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial information for 1995 and 1996 is as follows (in
thousands except per share data):

<TABLE>
<CAPTION>
1995 QUARTER
---------------------------------------- ----------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues.......................... $10,635 $ 9,702 $ 7,221 $10,638
Income from operations.................. 2,944 1,949 (1,092) 2,375
Net income.............................. 3,092 2,133 (882) 2,708
</TABLE>

<TABLE>
<CAPTION>
1996 QUARTER
---------------------------------------- ----------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues.......................... $12,415 $11,614 $ 8,305 $12,671
Income from operations.................. 4,628 4,434 982 5,947
Net income.............................. 4,736 4,703 1,314 3,559
Pro forma information:
Income taxes....................... 1,852 1,839 491 2,467
Net income......................... 2,884 2,864 823 3,832
Net income per share............... 0.38 0.39 0.09 0.38
</TABLE>

F-14
<PAGE> 69

[PICTURES OF EACH OF THE NINE CAMPUS FACILITIES INSERTED HERE.]
<PAGE> 70

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR BY ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, THOSE TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT
IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS
AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
The Company........................... 11
Use of Proceeds....................... 12
Price Range of Common Stock........... 12
Dividend Policy....................... 12
Capitalization........................ 13
Selected Consolidated Financial
Data................................ 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 20
Licensing, Accreditation and Financial
Aid Regulation...................... 29
Management and Directors.............. 41
Certain Transactions.................. 46
Principal and Selling Stockholders.... 48
Description of Capital Stock.......... 49
Shares Eligible for Future Sale....... 51
Underwriting.......................... 52
Legal Matters......................... 53
Experts............................... 53
Additional Information................ 53
Financial Statements.................. F-1
</TABLE>

======================================================
======================================================

1,150,000 SHARES
STRAYER EDUCATION, INC.
COMMON STOCK
STRAYER LOGO
------------
PROSPECTUS
, 1997

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

SMITH BARNEY INC.

LEGG MASON WOOD WALKER
INCORPORATED

======================================================
<PAGE> 71

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.............................................. $ 9,618
NASD filing fee................................................... 3,674
Nasdaq National Market Listing Fee................................ 15,450
Accounting fees and expenses...................................... 75,000
Legal fees and expenses........................................... 100,000
Printing and Engraving expenses................................... 85,000
Transfer Agent and Registrar fees and expenses.................... 1,500
Miscellaneous Expenses............................................ 59,758
--------
Total................................................... $350,000
========
</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> 72

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
- ------- --------------------------------------------------------------------------------
<S> <C> <C>
1.01** -- Proposed form of Underwriting Agreement.
3.01* -- Articles 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 October 1, 1991, between Strayer College, Inc. and
GLM-Highland Building Limited Partnership.
10.07* -- Lease Agreement, dated as of June 15, 1993, between Strayer College, Inc. and
Alexandria Tech Center I.
10.08* -- Employment Agreement, dated as of June 1, 1996, between Strayer Education, Inc.
and Ron K. Bailey.
10.09* -- Employment Agreement, dated as of June 1, 1996, between Strayer College, Inc.
and Harry T. Wilkins.
10.10* -- 1996 Stock Option Plan
10.11* -- Form of Tax Indemnification Agreement
10.12* -- First Amendment to Agreement of Lease for Office Condominium Space, dated July
25, 1994, between Strayer College, Inc. and Cross Creek Associates Limited
Partnership.
10.13+ -- Lease Agreement, dated as of February 29, 1996, between Confederation Life
Insurance Company (U.S.) in Rehabilitation and Strayer College, Inc.
10.14+ -- Office Building Lease, dated as of July 26, 1996, between Nikowski Limited
Partnership and Strayer College, Inc.
10.15+ -- Office Lease Agreement, dated as of June 17, 1996, between 1133 Fifteenth Street
Limited Partnership and Strayer College, Inc.
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.
</TABLE>

- ---------------
* Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(No. 333-3967).
** To be filed by amendment.

+ Previously filed.

+ Included in electronic filing via EDGAR.
(b) Financial Statement Schedules:

Schedule II-- Valuation and Qualifying Accounts and report thereon

II-2
<PAGE> 73

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> 74

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 the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Washington, District of Columbia, on March 26, 1997.

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 the Registration Statement has been signed by the following
persons in the capacities and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------- ---------------------------------- ---------------

/s/ RON K. BAILEY Chief Executive Officer and March 26, 1997
- ------------------------------------- Director (Principal Executive
Ron K. Bailey Officer)

/s/ HARRY T. WILKINS Chief Financial Officer (Principal March 26, 1997
- ------------------------------------- Financial and Accounting Officer)
Harry T. Wilkins

* Director March 26, 1997
- -------------------------------------
Stanley G. Elmore

* Director March 26, 1997
- -------------------------------------
Todd A. Milano

* Director March 26, 1997
- -------------------------------------
Jennie D. Seaton

* Director March 26, 1997
- -------------------------------------
Roland Carey

* Director March 26, 1997
- -------------------------------------
Donald T. Benson

* Director March 26, 1997
- -------------------------------------
G. Thomas Waite

* Director March 26, 1997
- -------------------------------------
Donald Stoddard

* Director March 26, 1997
- -------------------------------------
Charlotte Beason

*By: /s/ HARRY T. WILKINS
--------------------------------
Harry T. Wilkins
Attorney-in-fact
</TABLE>

II-4
<PAGE> 75

STRAYER EDUCATION, 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:
Year ended December 31, 1996................. $155 $788 $ (779) $ 164
Year ended December 31, 1995................. 135 655 (635) 155
Year ended December 31, 1994................. 453 665 (983) 135
Allowance for loan losses:
Year ended December 31, 1996................. 49 205 (107) 147
Year ended December 31, 1995................. -- 49 -- 49
</TABLE>
<PAGE> 76

REPORT OF INDEPENDENT ACCOUNTANTS

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

In connection with our audits of the consolidated financial statements of
Strayer Education, Inc. as of December 31, 1995 and 1996, and for each of the
three years in the period ended December 31, 1996, which financial statements
are included in the Prospectus, we have also audited the consolidated financial
statement schedule listed in Item 16 of Part II of the Registration Statement
herein.

In our opinion, this consolidated financial statement schedule, when
considered in relation to the basic consolidated 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.
January 31, 1997
<PAGE> 77

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------- ------------
<S> <C> <C> <C>
1.01** -- Proposed form of Underwriting Agreement. ..........................
3.01* -- Article 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 October 1, 1991, between Strayer
College, Inc. and GLM-Highland Building Limited Partnership. ......
10.07* -- Lease Agreement, dated as of June 15, 1993, between Strayer
College, Inc. and Alexandria Tech Center I. .......................
10.08* -- Employment Agreement, dated as of June 1, 1996, between Strayer
Education, Inc. and Ron K. Bailey..................................
10.09* -- Employment Agreement, dated as of June 1, 1996, between Strayer
College, Inc. and Harry T. Wilkins. ...............................
10.10* -- 1996 Stock Option Plan.............................................
10.11* -- Form of Tax Indemnification Agreement..............................
10.12* -- First Amendment to Agreement of Lease for Office Condominium Space,
dated July 25, 1994, between Strayer College, Inc. and Cross Creek
Associates Limited Partnership. ...................................
10.13+ -- Lease Agreement, dated as of February 29, 1996, between
Confederation Life Insurance Company (U.S.) in Rehabilitation and
Strayer College, Inc. .............................................
10.14+ -- Office Building Lease, dated as of July 26, 1996, between Nikowski
Limited Partnership and Strayer College, Inc. .....................
10.15+ -- Office Lease Agreement, dated as of June 17, 1996, between 1133
Fifteenth Street Limited Partnership and Strayer College, Inc. ....
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. ..........................................
</TABLE>

- ---------------
* Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(No. 333-3967).
** To be filed by amendment.

+ Previously filed.

+ Included in electronic filing via EDGAR.

<PAGE> 1
EXHIBIT 23.02

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in Amendment No. 1 to this Registration Statement
on Form S-1 (No. 333-23601) of our reports dated January 31, 1997, on our
audits of the consolidated financial statements and financial statement
schedule of Strayer Education, Inc. We also consent to the reference to our
firm under the caption "Experts".

/s/ COOPERS & LYBRAND L.L.P.

Coopers & Lybrand L.L.P.

Washington, D.C.
March 26, 1997