For-profits in Brazil fight rule change

Cut in support for private study has share prices falling

February 12, 2015

Source: Getty

Limited access: financial aid is no longer available to many students at private providers after alterations to eligibility criteria

Higher education companies in Brazil are lobbying the government to rescind new rules on financial aid that they fear will stop students enrolling on private courses.

A federal decree that was quietly published during the Christmas period tightened the criteria for the Student Financing Fund (FIES), one of the federal government’s two key initiatives to support individuals to study at private providers. Students may no longer benefit from both FIES funding, which involves low-interest loans, and the Ministry of Education’s University for All (ProUni) scheme, which provides scholarships. The ministry also set a minimum score on Enem, the national high school exam required for many university applications.

The sector was surprised by the changes, which are expected to reduce the number of individuals able to study at for-profit institutions, and they promptly caused a dive in the market value of Brazil’s biggest higher education companies.

When the decree was published, the share price of Kroton Educacional, which has 125 higher education institutions across 83 Brazilian cities and a total enrolment of more than a million students, fell from R16.62 (£4.30) to a low of R12.22 (£3.16).

Grupo Ser Educacional, which runs 30 sites in 21 cities, suffered a 40 per cent loss in market value, one newspaper reported. Since the start of the year, the four biggest companies have lost a total of R6.7 billion (£1.6 billion) in value, according to stock exchange figures quoted in news magazine Veja.

An industry body, the Brazilian Association for the Development of Higher Education (Abraes), has been negotiating with the Ministry of Education over the changes, according to a statement from Kroton, but new guidelines have yet to be drawn up.

Among other private higher education companies challenging the rule changes are Estácio, Anima Educação, Laureate and DeVry.

Legal challenge

Meanwhile, the National Federation of Private Schools (Fenep) has filed a legal challenge with the federal courts questioning the decree’s legality and seeking its suspension.

“Those who use FIES are state-educated pupils, who generally receive a lower quality of education,” Amábile Pacios, the president of Fenep, told the financial newspaper Valor Econômico. “So the government is penalising these students twice because it also hinders access to finance.”

The Ministry of Education has defended the changes, arguing that they were in line with the government’s goal of improving quality.

Last year, 2 per cent of higher education programmes – mainly private courses – lost their credentials for failing to meet standards.

The recent growth in the number of for-profit institutions has led to warnings from experts that maintaining standards could become difficult.

The 2013 higher education census counted about 300 public universities and colleges, compared with 2,000 private institutions.

Rita Barata, consultant for evaluation and coordinator in public health with Capes, the Brazilian Federal Agency for the Support and Evaluation of Graduate Education, said that for-profit institutions often lacked academic staff with doctorates, which can stifle research development.

“This in my view is the greatest limitation…post graduation,” she said. “Schools with few doctors have little research activity.”

A spokesman for the Ministry of Education said: “The decree is part of the improvements to FIES since its implementation and aims to make clear to students the procedures and criteria for obtaining funding.

“It is in line with the actions of the Education Ministry in recent years to improve the quality of higher education in the country.

“All these changes are studied by the ministry with the aim of giving greater sustainability to FIES operations.”

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