Edgar Filing: STRAYER EDUCATION INC

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 2002
REGISTRATION NO. 333-100407
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

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MARYLAND 8200 52-1975978
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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1100 WILSON BLVD., SUITE 2500
ARLINGTON, VA 22209
(703) 247-2500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

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STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
STRAYER EDUCATION, INC.
1100 WILSON BLVD., SUITE 2500
ARLINGTON, VA 22209
(703) 247-2500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

with copies to:

PETER J. HANLON, ESQ. JOHN R. SAGAN, ESQ.
JEFFREY S. HOCHMAN, ESQ. MICHAEL L. HERMSEN, ESQ.
WILLKIE FARR & GALLAGHER MAYER, BROWN, ROWE & MAW
787 SEVENTH AVENUE 190 SOUTH LASALLE STREET
NEW YORK, NY 10019 CHICAGO, IL 60603
(212) 728-8000 (312) 782-0600

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

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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. [ ]

CALCULATION OF REGISTRATION FEE
===============================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE(1)(2) FEE
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Common stock, par value $.01 per share......... 2,300,000 shares $ 56.39 $129,697,000 $ 11,933(3)
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(1) Includes an aggregate of 300,000 shares of common stock that may be
purchased by the underwriters to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(c) under the Securities Act solely for the
purpose of calculating the registration fee based upon the average of the
high and low reported sale prices of the common stock on the Nasdaq
National Market on October 4, 2002.
(3) Previously paid.

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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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================

The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.

SUBJECT TO COMPLETION, DATED NOVEMBER 1, 2002

2,000,000 Shares

STRAYER EDUCATION, INC.

Common Stock

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The shares of common stock are being sold by the selling stockholders. We
will not receive any of the proceeds from the shares of common stock sold by the
selling stockholders.

Our common stock is traded on the Nasdaq National Market under the symbol
"STRA." On October 31, 2002, the last reported sale price of our common stock
was $53.10 per share.

The underwriters have an option to purchase a maximum of 300,000 additional
shares from one of the selling stockholders to cover any over-allotments of
shares of common stock.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 8.

UNDERWRITING PROCEEDS
DISCOUNTS AND TO SELLING
PRICE TO PUBLIC COMMISSIONS STOCKHOLDERS
----------------- --------------- ---------------

Per Share ......... $ $ $
Total ............. $ $ $

Delivery of the shares of common stock will be made on or about , 2002.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.

CREDIT SUISSE FIRST BOSTON

BANC OF AMERICA SECURITIES LLC

LEGG MASON WOOD WALKER
INCORPORATED

The date of this prospectus is , 2002.

[GRAPHIC: MAP INDICATING LOCATIONS OF AND APPROVALS FOR STRAYER CAMPUSES]

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TABLE OF CONTENTS

PAGE
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PROSPECTUS SUMMARY .................................................... 1
RISK FACTORS .......................................................... 8
CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS ......................................... 14
USE OF PROCEEDS ....................................................... 15
DIVIDEND POLICY ....................................................... 15
PRICE RANGE OF COMMON STOCK ........................................... 15
CAPITALIZATION ........................................................ 16
SELECTED HISTORICAL FINANCIAL AND
OTHER INFORMATION .................................................. 17
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .......................................... 19
BUSINESS .............................................................. 25

PAGE
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MANAGEMENT ............................................................ 44
SELLING STOCKHOLDERS .................................................. 47
DESCRIPTION OF CAPITAL STOCK .......................................... 48
UNDERWRITING .......................................................... 55
NOTICE TO CANADIAN RESIDENTS .......................................... 57
LEGAL MATTERS ......................................................... 58
EXPERTS ............................................................... 58
WHERE YOU CAN FIND MORE
INFORMATION ........................................................ 58
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE ............................................. 59
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS ......................................................... F-1

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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT. INFORMATION CONTAINED ON OUR WEBSITES DOES NOT
CONSTITUTE PART OF THIS DOCUMENT.

PROSPECTUS SUMMARY

The following is a brief summary of the information that is included in
this prospectus. This summary may not contain all the information that may be
important to you. You should read the entire prospectus, including the financial
statements and reports included or incorporated by reference in this prospectus,
before making an investment decision. The terms "Strayer," "we," "us" and "our"
as used in this prospectus refer to Strayer Education, Inc. and its subsidiaries
as a combined entity, except where the context indicates that such term means
only Strayer Education, Inc. The terms "Strayer University" and the "University"
refer to Strayer University, Inc. The information in this prospectus assumes
that the underwriters' over-allotment option to purchase a maximum of 300,000
additional shares from one of the selling stockholders is not exercised.

COMPANY SUMMARY

Our company is a for-profit post-secondary education services company. Our
mission is to make high quality post-secondary education achievable and
convenient for working adults in today's economy. We work to fulfill this
mission by offering a variety of academic programs through Strayer University,
both in traditional classroom courses and through Strayer ONLINE. Strayer
University prides itself on making post-secondary education accessible to
working adults who missed or were previously unable to take advantage of
education opportunities.

Founded in 1892, Strayer University is an institution of higher learning
that offers undergraduate and graduate degree programs in business
administration, accounting and information technology at 20 campuses in
Maryland, Virginia, North Carolina and Washington, D.C. As of September 30,
2002, we had more than 16,500 students enrolled in our degree programs. Strayer
University is accredited by the Middle States Association of Colleges and
Schools, Commission on Higher Education, one of the six regional collegiate
accrediting agencies recognized by the U.S. Secretary of Education. Strayer
University is committed to providing an education that prepares working adult
students for advancement in their careers and professional lives. It attracts
students from around the country and throughout the world. As part of its
program offering, the University also offers classes via the internet through
Strayer ONLINE, providing its working adult students a more flexible and
convenient program offering and allowing students worldwide to take advantage of
Strayer University's programs.

We have experienced significant internal growth through new campus openings
and geographic expansion over the last several years. Since our initial public
offering in 1996, we have grown from eight campuses in one state and Washington,
D.C. to 20 campuses in three states and Washington, D.C., with six of our
campuses opened since the beginning of 2001. At the same time, we have developed
a robust and rapidly growing online education program. Since receiving
regulatory approval to offer our degree programs through Strayer ONLINE in 1997,
we have experienced rapid growth, with 6,822 students enrolled in at least one
class through Strayer ONLINE during the 2002 fall term.

In connection with our recapitalization in May 2001, we hired a new senior
management team, made significant investments in information technology
infrastructure to support planned growth in our online programs and embarked on
an aggressive program to open new campuses. As a result of these efforts, our
total revenues grew 19% last year from $78.2 million in 2000 to $92.9 million in
2001, with fall term enrollment growing from 12,100 students in 2000 to over
14,000 students in 2001. This strong growth has continued in 2002, with our
total revenues growing 26% from approximately $65.7 million during the nine
months ended September 30, 2001 to $82.5 million over the same period in 2002.
During this period of significant revenue growth, net income has remained
relatively flat primarily due to our significant investment in these new growth
initiatives.

INDUSTRY BACKGROUND AND OUTLOOK

The market for post-secondary education is large, growing and highly
fragmented. Total expenditures in the post-secondary education market are
expected to increase 33% (in constant

1998-1999 dollars) between 2000 and 2010 from $228 billion to $303 billion, and
total student enrollments are expected to increase 17%, from 15.0 million to
17.5 million during the same period. We believe that the demand for
career-oriented, post-secondary education will increase during the next several
years as a result of several economic, demographic and social trends, including
(1) an increase in demand by employers for skilled workers, with an estimated
7.0 million jobs requiring skilled labor expected to be created between 2000
and 2010, and (2) the significant income premium attributable to post-secondary
education.

The adult education market is a significant and growing component of the
post-secondary education market. We expect that the number of adults (persons 25
years and older) enrolled in post-secondary education will increase
significantly. We believe that this increase is primarily attributable to a
growing number of adults seeking to update and improve their skills in order to
enhance their earnings potential and to keep pace with the increasing demands of
a knowledge-based economy. In addition, we believe that many working adults will
seek accredited degree programs that provide flexibility to accommodate the
fixed schedules and time commitments associated with their professional, family
and personal obligations.

COMPANY STRENGTHS

We have a 110-year operating history and a proven track record of providing
education programs for working adults. We believe the following strengths
distinguish us from our competitors and position us to capitalize on the growing
demand for post-secondary education among working adults:

o CONSISTENT OPERATING HISTORY. We have been in continuous operation
since 1892 and have demonstrated an ability to grow consistently and
profitably. Our enrollments and revenues have grown each year since our
initial public offering in 1996.

o FOCUS ON WORKING ADULTS PURSUING DEGREE PROGRAMS. We focus on helping
working adults pursue college degrees in order to advance their career
and employment opportunities. We believe this is an attractive market
within the post-secondary education sector due to (1) the growing
number of adult students enrolling in post-secondary education programs
and (2) the highly motivated nature of adult students given the
personal sacrifices and time commitments required to attend class while
balancing their busy schedules. In addition, we believe that our focus
on associate, bachelor and graduate-level degree programs results in
extended periods of student enrollment and positively impacts the
visibility and predictability of our future revenues. Approximately 95%
of our students were enrolled in degree programs as of September 30,
2002.

o FLEXIBLE PROGRAM OFFERINGS. We maintain flexible quarterly programs
that allow working adult students to attend classes and complete
coursework on a convenient evening and weekend schedule throughout the
calendar year. Additionally, we developed Strayer ONLINE to enable
students to pursue a degree entirely online, thereby increasing the
accessibility and flexibility of our high quality educational content.

o STRONG OWNER-ORIENTED MANAGEMENT TEAM. In connection with our May 2001
recapitalization, we developed a new growth strategy and hired a new
senior management team in March of 2001 to implement this strategy. As
described below, under the leadership of Robert S. Silberman, our Chief
Executive Officer, we have embarked on various initiatives to increase
enrollment and expand our campuses. In addition, all of our senior
officers have made investments in Strayer through outright share
purchases in addition to their option grants.

COMPANY STRATEGY

Our goal is to be a leading provider of high quality post-secondary
education programs for working adults in the primary areas of business
administration, accounting and information technology. We consider adult
students to be our primary customers, with the various business and government
organizations that provide tuition assistance to their employees as our
secondary customers. We have identified the following factors as key to
executing our growth strategy:

o MAINTAIN STABLE ENROLLMENT IN OUR MATURE MARKETS. At September 30,
2002, we had 12 mature campuses (those in operation for more than three
years). Over the last five years, average enrollment at our mature
campuses has remained stable, while tuition has increased approximately
5% per year. Our goal is to maintain stable campus enrollments in our
mature markets, while increasing revenues through a combination of
complementary growth in those mature markets through Strayer ONLINE and
continuing market-based tuition increases.

o ACCELERATE NEW CAMPUS GROWTH. Our goal is to open two to three new
campuses per year (including two to three campuses by fall 2003) by
filling out the Washington, D.C., Maryland, Virginia and North Carolina
areas and by expanding into contiguous states. We expect to expand our
presence to capitalize on opportunities in geographic areas that
exhibit strong enrollment potential. We opened three new campuses (in
Maryland and Virginia) in 2001 and began offering classes at three new
campuses in North Carolina on July 1, 2002. Our new campuses have
typically turned profitable after five to six quarters of operation.
Due to strong demand at our Raleigh-Durham campus, we intend to open a
second campus in the Raleigh-Durham area by fall 2003. We have received
approval from the South Carolina Commission on Higher Education to
offer academic programs at up to three campuses in South Carolina. In
addition, the Committee on Post-Secondary Educational Institutions of
the Tennessee Higher Education Commission recommended authorization of
two new campuses in the State of Tennessee, subject to review and final
approval by the full Commission. We have also applied to operate in
Pennsylvania and Delaware and expect to pursue approval in these states
as part of our multi-year expansion plan.

o CONTINUE OUR GROWTH AT STRAYER ONLINE. We actively market Strayer
ONLINE to U.S. students throughout all 50 states and to international
students on a global basis. Strayer ONLINE has demonstrated success at
offering courses that are favored by working adult students because of
their quality and convenience. Enrollment at Strayer ONLINE has grown
at a greater than 80% compounded annual growth rate since its inception
in 1997. Enrollment in markets outside of commuting distance to a
Strayer University physical campus has grown at a greater than 50%
compounded annual growth rate in this period.

o DEVELOP CORPORATE/INSTITUTIONAL ALLIANCES. We believe we are well
positioned to pursue significant opportunities in the large
corporate/institutional market. Our convenient evening, weekend and
online courses provide an attractive solution for the education and
training needs of employers and their employees. We currently have
sponsorship and reimbursement arrangements of varying sorts with over
80 corporations and government institutions and are actively working to
increase the number of such arrangements.

o CONSIDER SELECTIVE ACQUISITIONS. We periodically evaluate opportunities
to acquire other providers of post-secondary education. When exploring
acquisition opportunities, we seek schools that we believe offer
programs with a good strategic fit to our current curricula and that
have demonstrated compliance with regulatory requirements and
accreditation standards. We also seek out operations that are located
in geographic locations that possess attractive demographic
characteristics. We compare potential acquisitions to other alternative
uses of our capital (including but not limited to organic growth
alternatives, share repurchases and special or increased dividends) in
terms of return on capital and enhancing shareholder value.

2001 RECAPITALIZATION

In May 2001, we underwent a $150 million recapitalization and change in
control transaction in which we issued 5,769,231 shares of our Series A
Convertible Preferred Stock (the "Series A Preferred Stock") to an investor
group led by New Mountain Partners, L.P. and including DB Capital Investors,
L.P. (collectively, the "selling stockholders"). We used the $150 million,
together with approximately $36.4 million of our cash and marketable securities,
to repurchase 7,175,000 shares of our outstanding common stock from our then
chief executive officer and majority stockholder at $25.00 per share.

GENERAL

We were incorporated in Maryland in 1996. Our principal executive offices
are located at 1100 Wilson Boulevard, Suite 2500, Arlington, VA 22209, and our
telephone number is 703-247-2500. Our website address is
www.strayereducation.com. The website address for Strayer University is
www.strayer.edu. We do not intend for the information contained on our websites
to constitute a part of this prospectus.

THE OFFERING

Issuer ............................. Strayer Education, Inc.

Common stock offered by selling
stockholders ..................... 2,000,000 shares

Common stock to be outstanding after
this offering .................... 10,352,412 shares

Use of proceeds .................... We will not receive any of the proceeds
from the sale of the shares. The selling
stockholders will receive all of the net
proceeds from the sale of shares of our
common stock offered by this prospectus.

Nasdaq symbol ...................... STRA

The number of shares to be outstanding after this offering is based on the
number of shares of our common stock outstanding as of September 30, 2002. The
shares being offered by the selling stockholders will be issued following
conversion of shares of their existing Series A Preferred Stock. The total
number of shares to be outstanding after this offering does not reflect:

o 4,003,869 shares of our common stock issuable upon conversion of our
remaining Series A Preferred Stock (after giving effect to this
offering) as of September 30, 2002 (including accrued payment-in-kind
dividends as of such date, but without giving effect to future accruals
of payment-in-kind dividends on these shares of Series A Preferred
Stock outstanding after giving effect to this offering);

o 970,000 shares of our common stock issuable upon exercise of
outstanding stock options as of September 30, 2002 (of which 293,333
are exercisable and 676,667 are currently not exercisable. The
outstanding options have a weighted average life of 5.6 years and a
weighted average exercise price of $37.09 per share); and

o 579,405 shares of our common stock available for future issuance under
our existing stock option plan as of September 30, 2002.

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth, for the periods and at the dates
indicated, our consolidated financial and other data. The information set forth
below is qualified by reference to, and should be read in conjunction with, our
consolidated financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- -------------------------
1999 2000 2001 2001 2002
-------- -------- -------- -------- ---------
(in thousands, except per share, percentage, enrollment and campus data)

INCOME STATEMENT DATA:
Revenues ................................... $ 69,776 $ 78,214 $ 92,876 $ 65,692 $ 82,547
-------- -------- -------- -------- ---------
Costs and expenses:
Instruction and educational support ...... 25,082 28,187 33,699 24,119 29,768
Selling and promotion .................... 7,765 8,480 12,576 8,727 12,537
General and administration ............... 9,405 10,620 13,094 9,381 12,757
-------- -------- -------- -------- ---------
42,252 47,287 59,369 42,227 55,062
-------- -------- -------- -------- ---------
Income from operations ..................... 27,524 30,927 33,507 23,465 27,485
Income before income taxes ................. 31,826 35,683 37,298 26,872 28,727
Net income ................................. 19,326 21,709 22,809 16,393 17,524
Preferred stock dividends and accretion..... -- -- 5,010 2,952 6,076
-------- -------- -------- -------- ---------
Net income available to common
stockholders ............................. $ 19,326 $ 21,709 $ 17,799 $ 13,441 $ 11,448
======== ======== ======== ======== =========
Net income per share:
Basic .................................... $ 1.25 $ 1.42 $ 1.62 $ 1.13 $ 1.37
======== ======== ======== ======== =========
Diluted .................................. $ 1.23 $ 1.41 $ 1.55 $ 1.10 $ 1.21
======== ======== ======== ======== =========
Weighted average shares outstanding:
Basic .................................... 15,506 15,324 10,970 11,851 8,352
======== ======== ======== ======== =========
Diluted (a) .............................. 15,711 15,451 14,737 14,847 14,485
======== ======== ======== ======== =========
OTHER DATA:
EBITDA (b) ................................. $ 29,418 $ 32,990 $ 36,150 $ 25,409 $ 30,137
EBITDA as % of revenue ..................... 42.2% 42.2% 38.9% 38.7% 36.5%
Depreciation ............................... $ 1,894 $ 2,063 $ 2,643 $ 1,944 $ 2,652
Capital expenditures ....................... $ 4,851 $ 4,388 $ 6,274 $ 5,074 $ 16,082(c)
Cash dividends per common share ............ $ 0.24 $ 0.25 $ 0.26 $ 0.195 $ 0.195
Enrollment (d) ............................. 11,504 12,096 14,009 14,009 16,532
Campuses (e) ............................... 13 14 17 17 20

DECEMBER 31, SEPTEMBER 30,
-------------------------------------- ---------------------------
1999 2000 2001 2001 2002
---------- ---------- ------------ ------------ ------------
(in thousands)

BALANCE SHEET DATA:
Cash and cash equivalents ...................... $12,213 $ 25,190 $ 57,659 $ 54,413 $ 44,695
Working capital (f) ............................ 18,170 26,742 49,846 43,734 48,665
Total assets ................................... 98,096 119,139 110,488 109,250 135,906
Long-term liabilities .......................... 141 -- 763 -- 1,911
Total liabilities .............................. 17,035 21,395 29,513 34,351 42,957
Mandatorily redeemable convertible
Series A preferred stock ..................... -- -- 148,347 147,653 150,485
Total stockholders' equity (deficit) ......... 81,061 97,744 (67,372) (72,754) (57,536)

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(a) Diluted average shares outstanding reflect the issuance of the Series A
Preferred Stock in May 2001, accrued payment-in-kind dividends on and
assumed conversion of the Series A Preferred Stock and outstanding options.

(b) EBITDA is calculated by adding back all depreciation and amortization to
income from operations. We believe that EBITDA serves as an important
financial analysis tool for measuring and comparing financial information
such as liquidity, operating performance and leverage. EBITDA should not be
considered by the reader as an alternative to net income or other cash flow
measures determined under generally accepted accounting principles as an
indicator of our performance or liquidity. EBITDA as disclosed in this
table may not be comparable to similarly titled amounts disclosed by other
companies.

(d) Reflects student enrollment as of the beginning of the fall academic
quarter for each year indicated and for the nine months ended September 30,
2001 and 2002.

(e) Reflects number of campuses in operation at the end of each period
indicated.

(f) Working capital is calculated by subtracting current liabilities from
current assets.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and all other information
contained in this prospectus or in the documents incorporated by reference in
this prospectus before deciding to purchase our common stock. The occurrence of
any of the following risks could materially harm our business, and you could
suffer a complete loss of your investment. See "Cautionary Notice Regarding
Forward-Looking Statements."

RISKS RELATED TO EXTENSIVE REGULATION OF OUR BUSINESS

IF WE FAIL TO COMPLY WITH THE EXTENSIVE REGULATORY REQUIREMENTS FOR OUR
BUSINESS, WE COULD FACE SIGNIFICANT MONETARY LIABILITIES, FINES AND PENALTIES,
INCLUDING LOSS OF ACCESS TO FEDERAL STUDENT LOANS AND GRANTS FOR OUR STUDENTS.

As a provider of higher education, we are subject to extensive regulation
on both the federal and state levels. In particular, the Higher Education Act of
1965, as amended (the "Higher Education Act"), and related regulations subject
Strayer University and all other higher education institutions that participate
in the various federal student financial aid programs under Title IV of the
Higher Education Act ("Title IV programs") to significant regulatory scrutiny.

The Higher Education Act mandates specific regulatory responsibilities for
each of the following components of the higher education regulatory triad: (1)
the federal government through the U.S. Department of Education; (2) the
accrediting agencies recognized by the U.S. Secretary of Education and (3) state
higher education regulatory bodies.

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 our
accreditation, authorization to operate in various states, permissible
activities, receipt of funds under Title IV programs or costs of doing business.

If we are found to be in noncompliance with any of these regulations,
standards or policies we could lose our access to Title IV program funds, from
which we currently derive approximately 55% of our revenues and the loss of
which would have a material adverse effect on our business. Findings of
noncompliance also could result in our being required to pay money damages, or
being subjected to fines, penalties, injunctions, restrictions on our access to
Title IV program funds or other censure that could have a material adverse
effect on our business.

IF WE FAIL TO MAINTAIN OUR INSTITUTIONAL ACCREDITATION, WE WOULD LOSE OUR
ABILITY TO PARTICIPATE IN TITLE IV PROGRAMS.

Strayer University is institutionally accredited by the Middle States
Association of Colleges and Schools, Commission on Higher Education ("Middle
States"), one of the six regional accrediting agencies recognized by the U.S.
Secretary of Education as a reliable indicator of educational quality.
Accreditation by an accrediting agency recognized by the Secretary of Education
is required in order for an institution to become and remain eligible to
participate in Title IV programs. The loss of accreditation would, among other
things, render Strayer University ineligible to participate in Title IV programs
and would have a material adverse effect on our business.

IF WE FAIL TO MAINTAIN ANY OF OUR STATE AUTHORIZATIONS, WE WOULD LOSE OUR
ABILITY TO OPERATE IN THAT STATE AND TO PARTICIPATE IN TITLE IV PROGRAMS THERE.

Strayer University is authorized to operate and to grant degrees or
diplomas by the applicable education agency of each state where it maintains a
campus. Such state authorization is required in order for students at the campus
to be eligible to participate in Title IV programs. The loss of authorization in
a state would, among other things, render Strayer University ineligible to
participate in Title IV programs at those state campus locations and could have
a material adverse effect on our business.

STUDENT LOAN DEFAULTS COULD RESULT IN THE LOSS OF ELIGIBILITY TO PARTICIPATE IN
TITLE IV PROGRAMS.

Under the Higher Education Act, an educational institution may lose its
eligibility to participate in some or all Title IV programs if, for three
consecutive federal fiscal years, more than 25% of their students who were
required to begin repaying their student loans in that fiscal year default on
their payment by the end of the next federal fiscal year. If we lose eligibility
to participate in Title IV programs because of high student loan cohort default
rates, it would have a material adverse effect on our business. Strayer
University's cohort default rates calculated by the Department of Education on
Federal Family Education Loan Program loans for the 2000, 1999 and 1998 federal
fiscal years, the three most recent years for which this information is
available, were 4.7%, 5.6% and 12.1%, respectively. The average cohort default
rates for for-profit institutions nationally were 9.4%, 9.3% and 11.4% in fiscal
years 2000, 1999 and 1998, respectively.

A FAILURE TO DEMONSTRATE "ADMINISTRATIVE CAPABILITY" OR "FINANCIAL
RESPONSIBILITY" MAY RESULT IN THE LOSS OF ELIGIBILITY TO PARTICIPATE IN TITLE
IV PROGRAMS.

If we fail to maintain "administrative capability" as defined by the
Department of Education, we could lose our eligibility to participate in Title
IV programs, which would have a material adverse effect on our business.
Furthermore, if we fail to demonstrate "financial responsibility" under the
Department of Education's regulations, we could lose our eligibility to
participate in Title IV programs or have that eligibility adversely conditioned,
which could have a material adverse effect on our business.

WE ARE SUBJECT TO SANCTIONS IF WE FAIL TO CALCULATE AND MAKE TIMELY PAYMENT OF
REFUNDS OF TITLE IV PROGRAM FUNDS FOR STUDENTS WHO WITHDRAW BEFORE COMPLETING
THEIR EDUCATIONAL PROGRAM.

The Higher Education Act and Department of Education regulations require us
to calculate refunds of unearned Title IV program funds disbursed to students
who withdraw from their educational program before completing it. If refunds are
not properly calculated and timely paid, we may be sanctioned or subject to
other adverse actions by the Department of Education, which could have a
material adverse effect on our business.

WE ARE DEPENDENT ON THE RENEWAL AND MAINTENANCE OF TITLE IV PROGRAMS.

Congress reauthorizes the Higher Education Act, which is the law governing
Title IV programs, approximately every five years. The next Congressional review
of the Higher Education Act is scheduled to take place in 2003. Additionally,
Congress determines the funding level for each Title IV program on an annual
basis. Any action by Congress that significantly reduces funding for Title IV
programs or the ability of our school or students to participate in these
programs could materially harm our business. A reduction in government funding
levels could lead to lower enrollments at our school and require us to arrange
for alternative sources of financial aid for our students. Lower student
enrollments or our inability to arrange such alternative sources of funding
could adversely affect our business.

OUR SCHOOL MAY LOSE ITS ELIGIBILITY TO PARTICIPATE IN FEDERAL STUDENT FINANCIAL
AID PROGRAMS IF THE PERCENTAGE OF OUR REVENUES DERIVED FROM THE PROGRAMS IS TOO
HIGH; WHICH, IN TURN, WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

A proprietary institution loses its eligibility to participate in the
federal student financial aid programs if it derives more than 90% of its
revenues, on a cash basis, from these programs in any fiscal year. In 2001, we
derived approximately 55% of our revenues from these programs.

IF WE FAIL TO COMPLY WITH THE DEPARTMENT OF EDUCATION'S INCENTIVE COMPENSATION
RULES, OUR BUSINESS COULD BE HARMED.

If we pay a bonus, commission or other incentive payment in violation of
applicable requirements, we could be subject to sanctions which could have a
material adverse effect on our business.

RISKS RELATED TO OUR BUSINESS

OUR SUCCESS DEPENDS UPON OUR ABILITY TO MANAGE FUTURE GROWTH.

We have experienced a period of significant growth since 2001, particularly
in our online business. Although we have made a substantial investment in
augmenting our financial and management information systems and other resources
to support future growth, we cannot assure you that we will be able to manage
further expansion effectively. Failure to do so could adversely affect our
business.

OUR SUCCESS DEPENDS IN PART ON OUR ABILITY TO UPDATE AND EXPAND THE CONTENT OF
EXISTING PROGRAMS AND DEVELOP NEW PROGRAMS IN A COST-EFFECTIVE MANNER AND ON A
TIMELY BASIS.

Our success depends in part on our ability to update and expand the content
of our programs, develop new programs in a cost-effective manner and meet
students' needs in a timely manner. Prospective employers of our graduates
increasingly demand that their entry-level employees possess appropriate
technological and other skills. The update and expansion of our existing
programs and the development of new programs may not be accepted by students,
prospective employers or the online education market. If we cannot respond to
changes in industry requirements, our business may be adversely affected. Even
if we are able to develop acceptable new programs, we may not be able to
introduce these new programs as quickly as students require or as quickly as our
competitors introduce competing new programs.

OUR STRATEGY OF OPENING NEW SCHOOLS AND ADDING NEW SERVICES IS DEPENDENT ON
REGULATORY APPROVALS AND REQUIRES SIGNIFICANT RESOURCES.

Establishing new schools and adding new services require us to make
investments in management, capital expenditures, marketing expenses and other
resources. To open a new school or location, we are required to obtain
appropriate state and accrediting agency approvals, which may be conditioned or
delayed in a manner which could significantly affect our growth plans. In
addition, to be eligible for federal student financial aid programs, the new
school or location would have to be certified by the Department of Education. We
cannot assure you that we will be able to successfully open new schools or add
new programs in the future. Our failure to manage effectively the operations of
newly established schools could adversely affect our business.

OUR FINANCIAL PERFORMANCE DEPENDS IN PART ON OUR ABILITY TO CONTINUE TO DEVELOP
AWARENESS OF THE PROGRAMS WE OFFER AMONG WORKING ADULT STUDENTS.

The continued development of awareness of the programs we offer among
working adult students is critical to the continued acceptance and growth of our
programs. If we are unable to continue to develop awareness of the programs we
offer, this could limit our enrollments and negatively impact our business. The
following are some of the factors that could prevent us from successfully
marketing our programs:

o the emergence of more successful competitors;

o customer dissatisfaction with our services and programs;

o performance problems with our online systems; and

o our failure to maintain or expand our brand or other factors related to
our marketing.

WE FACE STRONG COMPETITION IN THE POST-SECONDARY EDUCATION MARKET.

Post-secondary education in our market area is highly competitive. We
compete 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 Strayer University 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. Some of our
competitors in both the public and private sectors have substantially greater
financial and other resources than we do. This strong competition could
adversely affect our business.

STRAYER ONLINE AND STRAYER UNIVERSITY DO NOT RELY ON EXCLUSIVE PROPRIETARY
RIGHTS AND INTELLECTUAL PROPERTY, AND COMPETITORS MAY ATTEMPT TO DUPLICATE
STRAYER PROGRAMS AND METHODS.

Third parties may attempt to develop competing programs or duplicate or
copy aspects of Strayer University's curriculum, online library, quality
management and other proprietary content. Any such attempt, if successful, could
adversely affect our business. In the ordinary course of its business, Strayer
develops intellectual property of many kinds that is or will be the subject of
copyright, trademark, servicemark, patent, trade secret or other protections.
Such intellectual property includes but is not limited to Strayer's courseware
materials for classes taught via the internet or via other distance learning
means and business know-how and internal processes and procedures developed to
respond to the requirements of its operating and various education regulatory
agencies.

OUR FUTURE SUCCESS DEPENDS IN PART UPON OUR ABILITY TO RECRUIT AND RETAIN KEY
PERSONNEL.

In connection with our May 2001 recapitalization, we hired a new management
team, including Robert S. Silberman, our Chief Executive Officer, to implement
our new growth strategy. Our success to date has been, and our continuing
success will be, substantially dependent upon our ability to attract and retain
highly qualified executive officers, faculty and administrators and other key
personnel. If we cease to employ any of these integral personnel or fail to
manage a smooth transition to new personnel, our business could suffer.

IF STUDENTS FAIL TO REPAY THE LOANS WE MAKE, OUR BUSINESS WILL BE HARMED.

As an alternative to government-sponsored student loans, we direct student
loans through Education Loan Processing, Inc., our wholly owned subsidiary. As
of September 30, 2002, outstanding student loan balances were approximately $9.3
million, net of allowance for bad debts. These student loans are unsecured and
are not guaranteed. Losses related to unpaid student loans in excess of the
amounts we have reserved for bad debts could adversely affect our business.

SEASONAL AND OTHER FLUCTUATIONS IN OUR OPERATING RESULTS COULD ADVERSELY AFFECT
THE TRADING PRICE OF OUR COMMON STOCK.

Our business is subject to seasonal fluctuations, which cause our operating
results to fluctuate from quarter to quarter. This fluctuation may result in
volatility or have an adverse effect on the market price of our common stock. We
experience, and expect to continue to experience, seasonal fluctuations in our
revenue. Historically, our quarterly revenues and income have been lowest in the
third quarter (July through September) because fewer students are enrolled
during the summer months. We also incur significant expenses in preparing for
our peak enrollment in the fourth quarter (October through December), including
opening new campuses and investing in online infrastructure necessary to support
increased usage. These investments result in fluctuations in our operating
results which could result in volatility or have an adverse effect on the market
price of our common stock. In addition, because of the recent increase in the
use of personal computers and access to the internet, the online education
market is a rapidly evolving market, and we may not be able to accurately
forecast future enrollment growth and revenues.

NEW MOUNTAIN MAY EXERCISE INFLUENCE OVER THE MANAGEMENT AND POLICIES OF
STRAYER.

New Mountain, after giving effect to the sale of the shares offered by this
prospectus, will own approximately 25.6% of our equity securities. Through its
equity ownership, voting rights contained in the terms of the Series A Preferred
Stock and representation on our board of directors, it may be able to exercise
influence over the management and policies of Strayer. In addition, the level of
ownership of equity securities by New Mountain and certain provisions in the
terms of the Series A Preferred Stock may have the effect of making more
difficult or discouraging, absent the support of New Mountain, a proxy contest,
a merger involving Strayer, a tender offer, an open-market purchase program or
other purchases of common stock that could give our stockholders the opportunity
to realize a premium over the then-prevailing market price for their shares of
common stock. In

connection with the May 2001 recapitalization, New Mountain provided
significant advice and assistance in implementing our new growth strategy. New
Mountain's influence over us and assistance to us may decrease over time,
particularly as its ownership interest decreases.

REGULATORY REQUIREMENTS MAY MAKE IT MORE DIFFICULT TO ACQUIRE US.

A change in ownership resulting in a change of control of Strayer would
trigger a requirement for recertification by the Department of Education, a
review of our accreditation by Middle States and reauthorization by certain
state licensing agencies. If we underwent a change of control that required
approval 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 our ability to offer certain
educational programs, award certain degrees or diplomas, operate one or more of
our locations, admit certain students or participate in Title IV programs, which
in turn could have a material adverse effect on our business. These factors may
discourage takeover attempts.

WE MAY NOT BE ABLE TO SUCCESSFULLY COMPLETE OR INTEGRATE FUTURE ACQUISITIONS.

As part of our growth strategy, we expect to consider selective
acquisitions. We cannot assure you that we will be able to successfully complete
any acquisitions on favorable terms, or that if we do, that we will be able to
successfully integrate the personnel, operations and technologies of any such
acquisitions. Our failure to successfully complete or integrate future
acquisitions could disrupt our business and materially and adversely affect our
profitability and liquidity by distracting our management and employees and
increasing our expenses. In addition, because an acquisition is considered a
change in ownership and control of the acquired institution under applicable
regulatory standards, we must seek approval from the Department of Education and
most applicable state agencies and accrediting agencies when we acquire an
institution. If we were unable to obtain such approvals of an institution we
acquired, depending on the size of that acquisition, that failure could have a
material adverse effect on our business.

RISKS RELATED TO STRAYER ONLINE'S BUSINESS

STRAYER ONLINE'S FUTURE GROWTH DEPENDS ON THE CONTINUED GROWTH OF THE INTERNET.

Strayer ONLINE's business relies on the internet for its success. If
internet use does not continue to grow, or if the internet does not develop as
an effective online educational delivery system, our Strayer ONLINE business may
not grow as planned.

A number of factors could inhibit the growth and acceptance of the internet
and adversely affect our online business, including:

o inadequate internet infrastructure;

o security and privacy concerns;

o the lack of compelling content; and

o the unavailability of cost-effective, high-speed service and other
technological factors.

CAPACITY CONSTRAINTS OR SYSTEM DISRUPTIONS TO STRAYER ONLINE'S COMPUTER
NETWORKS COULD DAMAGE THE REPUTATION OF STRAYER UNIVERSITY AND LIMIT OUR
ABILITY TO ATTRACT AND RETAIN STUDENTS.

The performance and reliability of Strayer ONLINE's program infrastructure
is critical to our reputation and ability to attract and retain students. Any
system error or failure, or a sudden and significant increase in traffic, could
result in the unavailability of Strayer ONLINE's computer networks. We cannot
assure you that Strayer ONLINE will be able to expand its program infrastructure
on a timely basis sufficient to meet demand for its programs. Strayer ONLINE's
computer systems and operations could be vulnerable to interruption or
malfunction due to events beyond its control, including natural disasters and
telecommunications failures. Any interruption to Strayer ONLINE's computer
systems or operations could have a material adverse effect on our ability to
attract and retain students.

STRAYER ONLINE'S COMPUTER NETWORKS MAY BE VULNERABLE TO SECURITY RISKS THAT
COULD DISRUPT OPERATIONS AND REQUIRE IT TO EXPEND SIGNIFICANT RESOURCES.

Strayer ONLINE's computer networks may be vulnerable to unauthorized
access, computer hackers, computer viruses and other security problems. A user
who circumvents security measures could misappropriate proprietary information
or cause interruptions or malfunctions in operations. As a result, Strayer
ONLINE may be required to expend significant resources to protect against the
threat of these security breaches or to alleviate problems caused by these
breaches.

STRAYER ONLINE OPERATES IN A HIGHLY COMPETITIVE MARKET WITH RAPID TECHNOLOGICAL
CHANGES AND IT MAY NOT HAVE THE RESOURCES NEEDED TO COMPETE SUCCESSFULLY.

Online education is a highly fragmented and competitive market that is
subject to rapid technological change. Competitors vary in size and
organization from traditional colleges and universities, many of which have
some form of online education programs, to for-profit schools, corporate
universities and software companies providing online education and training
software. We expect the online education and training market to be subject to
rapid changes in technologies. Strayer ONLINE may not have the resources
necessary to compete with the rapidly changing technologies being developed by
its competitors, and its success will depend on its ability to adapt to these
changing technologies.

GOVERNMENT REGULATIONS RELATING TO THE INTERNET COULD INCREASE STRAYER ONLINE'S
COST OF DOING BUSINESS OR AFFECT ITS ABILITY TO GROW.

The increasing popularity and use of the internet and other online services
for the delivery of education has led and may lead to the adoption of new laws
and regulatory practices in the United States or elsewhere. These new laws
relate to or could relate to issues such as online privacy, copyright and
trademark, sales taxes, fair business practices and the requirement that online
education institutions qualify to do business as a foreign corporation or be
licensed as a school in one or more jurisdictions where they have no physical
location. New laws or regulations related to doing business over the internet
could increase Strayer ONLINE's cost of doing business or affect its ability to
increase enrollments and revenues.

In addition, if we fail to comply with the Department of Education's
requirements limiting the percentage of an institution's online offerings or
online students (as calculated pursuant to the applicable 50% rule), we could
lose our eligibility to participate in the Title IV Programs which would have a
material adverse effect on our business.

RISKS RELATED TO OUR STOCK PRICE

FUTURE SALES OF SHARES OF OUR COMMON STOCK MAY ADVERSELY AFFECT OUR STOCK PRICE.

After giving effect to this offering, New Mountain and DB Capital will own
approximately 25.6% and 9.3% (7.2% in the case of DB Capital, assuming the
underwriters' over-allotment option is exercised in full), respectively, of our
equity securities. All of these shares are eligible for sale under Rule 144,
subject to volume and other limitations, other than the holding period
requirement, of such rule. Upon completion of this offering, these shares will
be subject to lock-up agreements with the underwriters, pursuant to which New
Mountain and DB Capital will agree that they will not, subject to certain
exceptions, sell or otherwise dispose of any shares of common stock, or
securities or other rights convertible into or exchangeable or exercisable for
any shares of common stock, for 90 days after the date of this prospectus
without the prior written consent of Credit Suisse First Boston Corporation. We
cannot predict the effect, if any, that future sales of shares, or the
availability of shares of future sales, will have on the market price for our
common stock prevailing from time to time or our ability to raise capital
through an offering of our equity securities.

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the documents incorporated by reference in this
prospectus include "forward-looking statements," within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act") and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including, in particular, the statements about our plans, strategies and
prospects under the headings "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." We have used the words "may," "will," "expect," "believe,"
"estimate," "plan," "intend" and similar expressions in this prospectus and the
documents incorporated by reference in this prospectus to identify
forward-looking statements. We have based these forward-looking statements on
our current views with respect to future events and financial performance.
Actual results could differ materially from those projected in the
forward-looking statements. These forward-looking statements are subject to
risks, uncertainties and assumptions, including, among other things:

o the pace of growth of student enrollment;

o our continued compliance with Title IV of the Higher Education Act and
the regulations thereunder, as well as state and regional regulatory
requirements;

o competitive factors;

o risks associated with the opening of new campuses;

o risks associated with the offering of new educational programs and
adapting to other changes;

o risks associated with the acquisition of existing educational
institutions;

o risks related to the timing of regulatory approvals;

o our ability to continue to implement our online growth strategy; and

o general economic and market conditions.

You should not put undue reliance on any forward-looking statements. You
should understand that many important factors, including those discussed under
the headings "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," could cause our results to
differ materially from those expressed or suggested in any forward-looking
statements.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of shares of common
stock by the selling stockholders. The selling stockholders will receive all of
the net proceeds from the sale of the shares of common stock in this offering.

DIVIDEND POLICY

We declared a quarterly cash dividend of $0.065 per share of common stock
for the quarter ended September 30, 2002. This dividend was paid on October 22,
2002 to common stockholders of record on October 8, 2002. Any decision to
declare and pay dividends on common stock in the future will be made at the
discretion of our board of directors, after taking into account our financial
results, capital requirements and other factors the board may deem relevant.

PRICE RANGE OF COMMON STOCK

The following table sets forth, for the periods indicated, the high and
low sales prices per share of our common stock as reported on the Nasdaq
National Market.

HIGH LOW
------------ -----------

2000
First Quarter ............................. $ 31.63 $ 18.56
Second Quarter ............................ $ 27.13 $ 20.05
Third Quarter ............................. $ 26.00 $ 20.63
Fourth Quarter ............................ $ 27.00 $ 17.50

2001
First Quarter ............................. $ 35.38 $ 23.75
Second Quarter ............................ $ 50.00 $ 32.06
Third Quarter ............................. $ 54.70 $ 37.20
Fourth Quarter ............................ $ 51.95 $ 41.39

2002
First Quarter ............................. $ 52.31 $ 42.30
Second Quarter ............................ $ 66.45 $ 48.03
Third Quarter ............................. $ 63.62 $ 47.10
Fourth Quarter through October 31 ......... $ 62.93 $ 47.34

CAPITALIZATION

The following table sets forth our cash and our capitalization as of
September 30, 2002 and as adjusted to give effect to the offering. You should
read this table in conjunction with our consolidated financial statements and
the related notes included elsewhere in this prospectus and "Selected
Historical Financial and Other Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

AS OF SEPTEMBER 30, 2002
------------------------------
ACTUAL AS ADJUSTED(1)
------------ ---------------

Cash and cash equivalents
Unrestricted (money market funds) ......................................... $ 44,695 $ 44,390
Short-term investment (restricted) ........................................ 1,053 1,053
Marketable securities (short-term corporate bond fund) ..................... 12,075 12,075
--------- ---------
Total cash and marketable securities (including restricted cash) .......... $ 57,823 $ 57,518
========= =========
Unearned tuition ........................................................... $ 34,528 $ 34,528
Other liabilities .......................................................... 8,429 8,429
--------- ---------
Total liabilities ......................................................... $ 42,957 $ 42,957
Mandatorily redeemable convertible Series A preferred stock, par value
$0.01 per share; 6,000,000 shares authorized; 6,003,869 and 4,003,869
shares outstanding or accrued at September 30, 2002 on an actual and as
adjusted basis, respectively .............................................. $ 150,485 $ 100,807
Stockholders' equity (deficit):
Common stock, par value $0.01 per share; 20,000,000 shares authorized;
8,352,412 and 10,352,412 shares outstanding at September 30, 2002 on
an actual and as adjusted basis, respectively ........................... 83 103
Additional paid-in-capital ................................................ 1,759 51,417
Retained earnings (accumulated deficit) ................................... (59,423) (59,728)
Accumulated other comprehensive income (loss) ............................. 45 45
--------- ---------
Total stockholders' equity (deficit) ...................................... (57,536) (8,163)
--------- ---------
Total liabilities and stockholders' equity (deficit) .................... $ 135,906 $ 135,601
========= =========
----------

(1) As adjusted to give effect to the conversion of 2,000,000 shares of
Series A Preferred Stock into the common stock offered by this prospectus
and including an estimated $500,000 of transaction costs.

The table set forth above is based on the number of shares of our common
stock outstanding as of September 30, 2002. The total number of shares to be
outstanding after this offering does not reflect:

o 579,405 shares of our common stock available for future issuance under
our existing stock option plan as of September 30, 2002.

SELECTED HISTORICAL FINANCIAL AND OTHER INFORMATION

The following table sets forth, for the periods and at the dates indicated,
our selected consolidated financial and other data. The selected consolidated
income statement data for each of the five years ended December 31, 1997, 1998,
1999, 2000 and 2001 and the consolidated balance sheet data as of such dates
have been derived from our audited financial statements. The selected
consolidated income statement data for each of the nine month periods ended
September 30, 2001 and 2002 and the consolidated balance sheet data as of
September 30, 2001 and 2002 have been derived from our unaudited financial
statements. Interim operating results are not necessarily indicative of the
results for the full year.

The information set forth below is qualified by reference to, and should be
read in conjunction with, our consolidated financial statements and notes
thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other information included elsewhere or incorporated
by reference in this prospectus.

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------ -----------------------
1997 1998 1999 2000 2001 2001 2002
-------- -------- -------- -------- -------- -------- ---------
(in thousands, except per share, percentage, enrollment and campus data)

INCOME STATEMENT DATA:
Revenues .......................... $ 53,131 $ 62,872 $ 69,776 $ 78,214 $ 92,876 $ 65,692 $ 82,547
-------- -------- -------- -------- -------- -------- ---------
Costs and expenses:
Instruction and educational
support ........................ 19,738 22,355 25,082 28,187 33,699 24,119 29,768
Selling and promotion ........... 5,476 5,923 7,765 8,480 12,576 8,727 12,537
General and administration ...... 7,232 8,387 9,405 10,620 13,094 9,381 12,757
-------- -------- -------- -------- -------- -------- ---------
32,446 36,665 42,252 47,287 59,369 42,227 55,062
-------- -------- -------- -------- -------- -------- ---------
Income from operations ............ 20,685 26,207 27,524 30,927 33,507 23,465 27,485
Income before income taxes ........ 23,449 29,387 31,826 35,683 37,298 26,872 28,727
Net income ........................ 14,437 17,947 19,326 21,709 22,809 16,393 17,524
Preferred stock dividends and
accretion ....................... -- -- -- -- 5,010 2,952 6,076
-------- -------- -------- -------- -------- -------- ---------
Net income available to common
stockholders .................... $ 14,437 $ 17,947 $ 19,326 $ 21,709 $ 17,799 $ 13,441 $ 11,448
======== ======== ======== ======== ======== ======== =========
Net income per share:
Basic ........................... $ 0.96 $ 1.15 $ 1.25 $ 1.42 $ 1.62 $ 1.13 $ 1.37
======== ======== ======== ======== ======== ======== =========
Diluted ......................... $ 0.93 $ 1.12 $ 1.23 $ 1.41 $ 1.55 $ 1.10 $ 1.21
======== ======== ======== ======== ======== ======== =========
Weighted average shares
outstanding:
Basic ........................... 15,037 15,626 15,506 15,324 10,970 11,851 8,352
======== ======== ======== ======== ======== ======== =========
Diluted (a) ..................... 15,590 16,063 15,711 15,451 14,737 14,847 14,485
======== ======== ======== ======== ======== ======== =========
OTHER DATA:
EBITDA (b) ........................ $ 21,921 $ 27,832 $ 29,418 $ 32,990 $ 36,150 $ 25,409 $ 30,137
EBITDA as % of revenue ............ 41.3% 44.3% 42.2% 42.2% 38.9% 38.7% 36.5%
Depreciation ...................... $ 1,236 $ 1,625 $ 1,894 $ 2,063 $ 2,643 $ 1,944 $ 2,652
Capital expenditures .............. $ 2,286 $ 7,392 $ 4,851 $ 4,388 $ 6,274 $ 5,074 $ 16,082(c)
Cash dividends per common
share ........................... $ 0.17 $ 0.23 $ 0.24 $ 0.25 $ 0.26 $ 0.195 $ 0.195
Enrollment (d) .................... 9,419 10,449 11,504 12,096 14,009 14,009 16,532
Campuses (e) ...................... 10 11 13 14 17 17 20

DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- -------------------------
1997 1998 1999 2000 2001 2001 2002
---------- ---------- ---------- ---------- ------------ ------------ ------------
(in thousands)

BALANCE SHEET DATA:
Cash and cash equivalents ......... $15,934 $18,614 $12,213 $ 25,190 $ 57,659 $ 54,413 $ 44,695
Working capital (f) ............... 20,600 23,363 18,170 26,742 49,846 43,734 48,665
Total assets ...................... 78,248 97,146 98,096 119,139 110,488 109,250 135,906
Long-term liabilities ............. 137 330 141 -- 763 -- 1,911
Total liabilities ................. 13,125 15,501 17,035 21,395 29,513 34,351 42,957
Mandatorily redeemable
convertible Series A
preferred stock ................. -- -- -- -- 148,347 147,653 150,485
Total stockholders' equity
(deficit) ....................... 65,123 81,645 81,061 97,744 (67,372) (72,754) (57,536)

----------
(a) Diluted average shares outstanding reflect the issuance of the
Series A Preferred Stock in May 2001, accrued payment-in-kind
dividends on and assumed conversion of the Series A Preferred Stock
and outstanding options.

(b) EBITDA is calculated by adding back all depreciation and
amortization to income from operations. We believe that EBITDA
serves as an important financial analysis tool for measuring and
comparing financial information such as liquidity, operating
performance and leverage. EBITDA should not be considered by the
reader as an alternative to net income or other cash flow measures
determined under generally accepted accounting principles as an
indicator of our performance or liquidity. EBITDA as disclosed in
this table may not be comparable to similarly titled amounts
disclosed by other companies.

(d) Reflects student enrollment as of the beginning of the fall academic
quarter for each year indicated and for the nine months ended
September 30, 2001 and 2002.

(e) Reflects number of campuses in operation at the end of each period
indicated.

(f) Working capital is calculated by subtracting current liabilities
from current assets.

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

You should read the following discussion in conjunction with "Selected
Historical Financial and Other Information," our consolidated financial
statements and the notes thereto and the other information appearing elsewhere,
or incorporated by reference, in this prospectus.

BACKGROUND AND OVERVIEW

We are an education services holding company that owns Strayer University
and Education Loan Processing, Inc. ("ELP"). The University is an institution of
higher education offering undergraduate and graduate degree programs at 20
campuses in Maryland, Virginia, North Carolina and Washington, D.C. and
worldwide through Strayer ONLINE. ELP administers Strayer's education loan
programs.

In May 2001, we issued $150 million of Series A Preferred Stock. We used
the $150 million, together with approximately $36.4 million of cash and
marketable securities, to repurchase 7,175,000 shares of our outstanding common
stock from our then chief executive officer and majority stockholder at $25.00
per share.

As set forth below, enrollment (measured by fall quarter to fall quarter),
full-time tuition rates, revenues, operating income and net income have all
increased in each of the last three years and during the nine months ended
September 30, 2002.

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ---------------------------
1999 2000 2001 2001 2002
------------- ------------- ------------- ------------- -------------
(in thousands, except enrollment, tuition per credit hour and
earnings per share data)

Fall enrollment (a) ......................... 11,504 12,096 14,009 14,009 16,532
% Change from prior year .................... 10.1% 5.1% 15.8% 15.8% 18.0%
Full-time tuition (per credit hour) ......... $ 200.00 $ 210.00 $ 220.50 $ 220.50 $ 231.50
% Change from prior year .................... 5.3% 5.0% 5.0% 5.0% 5.0%
Revenues .................................... $ 69,776 $ 78,214 $ 92,876 $ 65,692 $ 82,547
% Change from prior year .................... 11.0% 12.1% 18.7% 17.0% 25.7%
Operating income ............................ $ 27,524 $ 30,927 $ 33,507 $ 23,465 $ 27,485
% Change from prior year .................... 5.0% 12.4% 8.3% 11.6% 17.1%
Net income .................................. $ 19,326 $ 21,709 $ 22,809 $ 16,393 $ 17,524
% Change from prior year .................... 7.7% 12.3% 5.1% 10.7% 6.9%
Diluted earnings per share .................. $ 1.23 $ 1.41 $ 1.55 $ 1.10 $ 1.21
% Change from prior year (b) ................ 10.1% 14.2% 10.2% 14.6% 10.0%

----------

(a) Fall term used for September 30, 2001 and 2002 enrollment.

(b) Percentage change based on unrounded actual numbers.

Strayer University derives over 98% of its revenue from tuition collected
from its students. The academic year of the University is divided into four
quarters, which approximately coincide with the four quarters of the calendar
year. Students make payment arrangements for the tuition for each course prior
to the beginning of the quarter. When students register for courses, tuition is
recorded as unearned tuition, which is recognized as courses are taught through
the academic quarter. If a student withdraws from a course prior to completion,
the University refunds a portion of the tuition depending on when the withdrawal
occurs. The University also derives revenue from various fees such as
application fees, placement examination fees and "no-show" fees related to
students who fail to attend a course and do not officially withdraw. Beginning
in 1998, the University contracted out its bookstore operations to a third
party.

Strayer University records tuition receivable when students register for
the academic quarter, generally prior to the end of the previous academic
quarter. Because the University's academic quarters coincide with the calendar
quarters, tuition receivable at the end of any calendar quarter largely
represents student tuition due for the following academic quarter. Based upon
past experience and judgment, the University 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. Our bad debt expense as a percentage of revenue for the
years ended December 31, 1999, 2000 and 2001 was 2.4%, 2.7% and 1.7%,
respectively.

Strayer University's expenses consist of instruction and educational
support expenses, selling and promotion expenses, and general and administration
expenses. Instruction and educational support expenses generally contain items
of expense directly attributable to the educational activity of the University.
This expense category includes salaries and benefits of faculty, academic
administrators and student support personnel. Instruction and educational
support expenses also include costs 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 the corporate offices located in Arlington
and Newington, Virginia.

Selling and promotion 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
employees engaged in management, student services, accounting, human resources,
compliance and other business functions, along with the occupancy costs
attributable to such functions.

Investment and other income consists primarily of earnings and realized
gains on investments.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

"Management's Discussion and Analysis of Financial Condition and Results of
Operations" discusses our consolidated financial statements, which have been
prepared in accordance with the generally accepted accounting principles of the
United States. The preparation of these consolidated financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and the related
disclosures of contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates and judgments related to its allowance for
uncollectible accounts, reserves for student loan losses, income tax provisions
and accrued expenses. Management bases its estimates and judgments on historical
experience and various other factors and assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments regarding the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

Management believes that the following critical accounting policies affect
its more significant judgments and estimates used in the preparation of its
consolidated financial statements. We record estimates for our allowance for
uncollectible accounts for tuition receivable from students and for loan loss
reserves from student loans granted. If the financial condition of our students
were to deteriorate, resulting in impairment of their ability to make required
payments for tuition or loans payable to us, additional allowances and loan
reserves may be required. We record estimates for our accrued expenses and
income tax liabilities. Should actual results differ from our estimates,
revisions to our accrued expenses and income tax liabilities may be required.

RESULTS OF OPERATIONS

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

NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------- ---------------------
1999 2000 2001 2001 2002
--------- --------- --------- --------- ---------

Revenues ..................................... 100% 100% 100% 100% 100%
---- ---- ---- ---- ----
Costs and expenses:
Instruction and educational support ......... 35.9 36.0 36.3 36.7 36.1
Selling and promotion ....................... 11.1 10.8 13.5 13.3 15.2
General and administration .................. 13.5 13.6 14.1 14.3 15.5
---- ---- ---- ---- ----
Income from operations ....................... 39.5 39.5 36.1 35.7 33.3
Investment and other income .................. 6.2 6.1 4.1 5.2 1.5
---- ---- ---- ---- ----
Income before income taxes ................... 45.7 45.6 40.2 40.9 34.8
Provision for income taxes ................... 18.0 17.9 15.6 16.0 13.6
---- ---- ---- ---- ----
Net income ................................... 27.7% 27.8% 24.6% 25.0% 21.2%
==== ==== ==== ==== ====
Tax rate ..................................... 39.3% 39.2% 38.8% 39.0% 39.0%

NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2001

Revenues. Revenues increased 26% from $65.7 million for the nine months
ended September 30, 2001 to $82.5 million for the corresponding period in 2002,
principally due to an increase in student enrollments and a 5% tuition increase
effective for 2002.

Instruction and educational support expenses. Instruction and educational
support expenses increased 23% from $24.1 million for the nine months ended
September 30, 2001 to $29.8 million for the corresponding period in 2002. The
addition of new faculty due to enrollment growth, salary increases and new
campus openings contributed to the increase.

Selling and promotion expenses. Selling and promotion expenses increased
44% from $8.7 million for the nine months ended September 30, 2001 to $12.5
million for the corresponding period in 2002 due to an increase in advertising
costs, specifically television advertising, increased advertising for the new
campus openings and Strayer ONLINE activities and increases in the number of
admissions representatives.

General and administration expenses. General and administration expenses
increased 36% from $9.4 million for the nine months ended September 30, 2001 to
$12.8 million for the corresponding period in 2002, principally due to the
addition of three new campuses, an increase in administrative personnel and
salary increases.

Income from operations. Operating income increased 17% from $23.5 million
for the nine months ended September 30, 2001 to $27.5 million for the
corresponding period in 2002. The increase was due to the aforementioned
factors.

Investment and other income. Investment and other income decreased 64%
from $3.4 million for the nine months ended September 30, 2001 to $1.2 million
for the corresponding period in 2002. The decrease was due to the overall
reduction in the amount of cash and marketable securities outstanding and lower
interest rates in 2002. In the 2001 period, marketable securities were
liquidated at a gain of $0.9 million to help fund our share repurchase.

Net income. Net income increased 7% from $16.4 million for the nine months
ended September 30, 2001 to $17.5 million for the corresponding period in 2002
because of the factors described above.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Revenues. Revenues increased 18.7% from $78.2 million in 2000 to $92.9
million in 2001 due to an increase in the number of students and a 5% tuition
increase in 2001.

Instruction and educational support expenses. Instruction and educational
support expenses increased 19.6% from $28.2 million in 2000 to $33.7 million in
2001. A salary increase, the addition of new faculty due to enrollment growth
and the addition of three new campuses contributed to the increase.

Selling and promotion expenses. Selling and promotion expenses increased
48.3% from $8.5 million in 2000 to $12.6 million in 2001 principally due to an
increase in advertising costs, specifically television advertising, increased
advertising for the new campus openings and our Strayer ONLINE activities,
increases in the number of admission representatives at existing campuses and
ONLINE and the addition of admissions personnel at three new campuses.

General and administration expenses. General and administration expenses
increased 23.3% from $10.6 million in 2000 to $13.1 million in 2001 principally
due to the addition of three new campuses, an increase in administrative
personnel and the addition of a new chief executive officer, chief operating
officer, corporate counsel, chief technology officer and marketing director.

Income from operations. Income from operations increased 8.3% from $30.9
million in 2000 to $33.5 million in 2001 due to the aforementioned factors.

Investment and other income. Investment and other income decreased 20.3%
from $4.8 million in 2000 to $3.8 million in 2001. We liquidated a majority of
our marketable securities in the first quarter of 2001 to help fund our
self-tender offer. This decline in marketable securities along with a lower
interest rate environment resulted in lower investment income which was
partially offset by a $0.9 million gain from the liquidation of the marketable
securities.

Provision for income taxes. Income tax expense increased 3.7% from $14.0
million in 2000 to $14.5 million in 2001. This increase was primarily due to
the increase in income before taxes attributable to the factors discussed
above, and offset by a slightly lower tax rate.

Net income. Net income increased 5.1% from $21.7 million in 2000 to $22.8
million in 2001 because of the factors discussed above.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

Revenues. Revenues increased 12.1% from $69.8 million in 1999 to $78.2
million in 2000 due to an increase in the number of students and a 5% tuition
increase in 2000.

Instruction and educational support expenses. Instruction and educational
support expenses increased 12.4% from $25.1 million in 1999 to $28.2 million in
2000 due to an increase in the number of personnel to support increased
enrollment, salary increases and the addition of a new campus in Chesterfield,
Virginia.

Selling and promotion expenses. Selling and promotion expenses increased
9.2% from $7.8 million in 1999 to $8.5 million in 2000 principally due to
increased advertising costs and the addition of admissions personnel.

General and administration expenses. General and administration expenses
increased 12.9% from $9.4 million in 1999 to $10.6 million in 2000 principally
due to the addition of administrative personnel in order to support increased
enrollments and the addition of a new campus in Chesterfield, Virginia.

Income from operations. Income from operations increased 12.4% from $27.5
million in 1999 to $30.9 million in 2000 primarily due to the increases in
student enrollment and tuition in 2000.

Investment and other income. Investment and other income increased 10.6%
from $4.3 million in 1999 to $4.8 million in 2000 due to an increase in
realized investment gains and interest on higher levels of invested cash and
cash equivalents.

Provision for income taxes. Income tax expense increased 11.8% from $12.5
million in 1999 to $14.0 million in 2000 primarily due to the increase in
income before taxes attributable to the factors discussed above and no material
change in our tax rate.

Net income. Net income increased 12.3% from $19.3 million in 1999 to $21.7
million in 2000 because of the factors discussed above.

SEASONALITY

Our 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
2001, enrollments at the beginning of the winter, spring, summer and fall
academic quarters were 12,005, 12,044, 9,379 and 14,009, respectively.

Costs generally are not affected by the seasonal factors and do not vary
significantly on a quarterly basis. To some extent, however, instruction and
educational support expenses are lower in the third quarter because fewer
part-time faculty are needed.

The following table sets forth our revenues on a quarterly basis for the
years ended December 31, 1999, 2000 and 2001.

QUARTERLY REVENUES

1999 2000 2001
----------------------- ---------------------- ---------------------
THREE MONTHS ENDED AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------------------ ------ ------- ------ ------- ------ -------
(in thousands)

March 31 ................ $ 18,914 27% $21,128 27% $23,644 25%
June 30 ................. 17,643 25 20,325 26 23,826 26
September 30 ............ 12,866 19 14,691 19 18,222 20
December 31 ............. 20,353 29 22,070 28 27,184 29
-------- --- ------- --- ------- ---
Total for Year ......... $ 69,776 100% $78,214 100% $92,876 100%
======== === ======= === ======= ===

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2002, we had cash, cash equivalents and marketable
securities of $56.8 million compared to $57.7 million at December 31, 2001. We
had no debt as of September 30, 2002 or December 31, 2001. Beginning in the
second quarter of 2002, we began investing in a diversified no load,
short-term, investment grade corporate bond fund in an effort to generate a
somewhat higher yield on our short term, liquid assets than our holdings in
overnight and money market funds, but take only limited credit and interest
rate risk. As of September 30, 2002, we had invested a total of $12 million in
this fund. At September 30, 2002, the 425 issues in this fund had an average
credit rating of Aa3, an average maturity of 2.7 years and an average duration
of 2.2 years, as well as an average yield of 4.3%. We generated $19.4 million
from operating activities in the first nine months of 2002. Capital
expenditures for the nine months ended September 2002 were $16.1 million, of
which $12 million was in the first quarter for the purchase of three campus
facilities. In the third quarter, bad debt expense increased from 0.9% of
revenue in 2001 to 1.3% for the same period in 2002. Days sales outstanding,
adjusted to exclude tuition receivable related to future quarters, was seven
days in the third quarter of 2002, unchanged compared to the same period in
2001.

Currently, we invest our cash in bank overnight deposits, money market
funds and the short-term corporate bond fund described above. In addition, we
have available two $10 million credit facilities from banks under which there
is no outstanding balance drawn. We believe that existing cash and cash
equivalents, the no load short-term corporate bond fund, cash generated from
operating activities, and if necessary, cash borrowed under the credit
facilities, will be sufficient to meet our cash requirements for at least the
next 12 months.

We have the following contractual commitments associated with operating
leases and preferred stock cash dividends as of September 30, 2002:

PAYMENTS DUE BY PERIOD (IN THOUSANDS)
--------------------------------------------------------
AFTER 5
WITHIN 1 YEAR 2-3 YEARS 4-5 YEARS YEARS
--------------- ----------- ----------- ----------

Operating Leases ......... $ 5,264 $ 8,036 $ 5,421 $16,343
Preferred Stock Cash
Dividends* .............. 5,250 10,500 10,590 21,065
------- ------- ------- -------
Total .................... $10,514 $18,536 $16,011 $37,408
======= ======= ======= =======

----------
* Preferred stock cash dividend amounts have not been adjusted to reflect
this offering. Common stock dividend payments, while not a contractual
commitment, have historically been paid by us.

TOTAL POTENTIAL SHARE ISSUANCE

Shares used to compute diluted earnings per share include common shares
issued and outstanding, the assumed conversion of shares of Series A Preferred
Stock outstanding or accrued and the assumed exercise of issued stock options
using the treasury stock method. As of September 30, 2002, our total current
and potential shares outstanding are as follows:

Current
-------
Common shares outstanding at September 30, 2002 ............................ 8,352,412(a)
Series A Preferred Stock, convertible on a 1:1 basis, outstanding or accrued
at September 30, 2002 ..................................................... 6,003,869(a)
Authorized, issued and outstanding options using Treasury Stock Method ..... 200,250
---------
Subtotal ................................................................... 14,556,531

Potential
---------
Accrual of payment-in-kind dividends on Series A Preferred Stock through
May 2006 .................................................................. 962,924(a)(b)
Total issued stock options, less options accounted for using the Treasury
Stock Method above ........................................................ 769,750
Authorized but unissued options ............................................ 579,405
----------
Subtotal ................................................................... 2,312,079
----------
Total current and potential ................................................ 16,868,610
==========

----------

(a) Since this information is as of September 30, 2002, the impact of
the conversion of our Series A Preferred Stock to common stock in
connection with this offering has not been included.

(b) The actual number of preferred stock dividends may be smaller as we
have the right to redeem, and thereby cause conversion of, our
Series A Preferred Stock into common stock after May 15, 2004 if our
common stock price trades above $52.00 per share for 20 consecutive
trading days.

BUSINESS

OVERVIEW

Founded in 1892, Strayer University is an institution of higher learning
that offers undergraduate and graduate degree programs in business
administration, accounting and information technology at 20 campuses in
Maryland, Virginia, North Carolina and Washington, D.C. As of September 30,
2002, we had more than 16,500 students enrolled in our degree programs. Strayer
University is accredited by Middle States, one of the six regional collegiate
accrediting agencies recognized by the U.S. Secretary of Education. Strayer
University is committed to providing an education that prepares working adult
students for advancement in their careers and professional lives. It attracts
students from around the country and throughout the world. As part of its
program offering, the University also offers classes via the internet through
Strayer ONLINE, providing its working adult students a more flexible and
convenient program offering and allowing students worldwide to take advantage
of Strayer University's programs.

We have experienced significant internal growth through new campus
openings and geographic expansion over the last several years. Since our
initial public offering in 1996, we have grown from eight campuses in one state
and Washington, D.C. to 20 campuses in three states and Washington, D.C., with
six of our campuses opened since the beginning of 2001. At the same time, we
have developed a robust and rapidly growing online education program. Since
receiving regulatory approval to offer our degree programs through Strayer
ONLINE in 1997, we have experienced rapid growth, with 6,822 students enrolled
in at least one class through Strayer ONLINE during the 2002 fall term.

In connection with our recapitalization in May 2001, we hired a new senior
management team, made significant investments in information technology
infrastructure to support planned growth in our online programs and embarked on
an aggressive program to open new campuses. As a result of these efforts, our
total revenues grew 19% last year from $78.2 million in 2000 to $92.9 million
in 2001, with fall term enrollment growing from 12,100 students in 2000 to over
14,000 students in 2001. This strong growth has continued in 2002, with our
total revenues growing 26% from approximately $65.7 million during the nine
months ended September 30, 2001 to $82.5 million over the same period in 2002.
During this period of significant revenue growth, net income has remained
relatively flat primarily due to our significant investment in these new growth
initiatives.

INDUSTRY BACKGROUND AND OUTLOOK

The market for post-secondary education is large, growing and highly
fragmented. Total expenditures in the post-secondary education market are
expected to increase 33% (in constant 1998-1999 dollars) between 2000 and 2010
from $228 billion to $303 billion, and total student enrollments are expected
to increase 17%, from 15.0 million to 17.5 million during the same period. We
believe that the demand for career-oriented, post-secondary education will
increase during the next several years as a result of several demographic,
economic and social trends, including:

o an increase in demand by employers for professional and skilled
workers, with an estimated 7.0 million jobs requiring skilled labor
expected to be created between 2000 and 2010;

o a projected 10% growth in the annual number of high school graduates
from 2.8 million in 2000 to 3.1 million in 2010;

o our expectation that the number of adults (persons 25 years old and
older) enrolling in post-secondary education will increase
significantly;

o the significant and measurable income premium attributable to
post-secondary education; and

o budgetary constraints at traditional colleges and universities.

The adult education market is a significant and growing component of the
post-secondary education market. We believe that the market for post-secondary
adult education should continue to increase as working adults seek additional
education and training to update and improve their skills in order to enhance
their earnings potential and to keep pace with the increasing demands of a
knowledge-based economy. In addition, we believe that many working adults will
seek accredited degree programs that provide flexibility to accommodate the
fixed schedules and time commitments associated with their professional, family
and personal obligations.

COMPANY STRENGTHS

We have a 110-year operating history and a proven track record of
providing education programs for working adults. We believe the following
strengths distinguish us from our competitors and position us to capitalize on
the growing demand for post-secondary education among working adults:

o PRACTICAL AND DIVERSIFIED CURRICULA. We offer core curricula in stable,
high demand areas of education. In order to keep pace with a changing
knowledge-based economy, we constantly strive to meet the evolving
needs of our students and their employers by regularly refining and
updating our existing educational programs. Additionally, we replicate
programs that are successful in a given school at additional locations
throughout our network of campuses. Strayer University currently offers
32 different degree, diploma and certificate programs to its students.
We believe that our diversified program offerings provide us with
greater stability of enrollments versus competitors that are more
focused in one particular field of study.

o FLEXIBLE PROGRAM OFFERINGS. We maintain flexible quarterly programs
that allow working adult students to attend classes and complete
coursework on a convenient evening and weekend schedule throughout the
calendar year. During the fall 2002 quarter, over 85% of the courses we
offered were night or weekend courses. Additionally, we developed
Strayer ONLINE to enable students to pursue a degree entirely online,
thereby increasing the accessibility and flexibility of our high
quality educational content. Approximately 41% of our traditional
students enrolled as of the fall 2002 quarter were taking or have taken
at least one course through Strayer ONLINE. We believe that these
flexible offerings distinguish us from many traditional universities
that currently do not effectively address the unique requirements of
working adults.

o ATTRACTIVE AND CONVENIENT CAMPUS LOCATIONS. Our campuses are located in
growing metropolitan areas in the mid-Atlantic region where there are
large populations of working adults. These geographic areas offer large
populations of working adults with demographic characteristics similar
to those of our typical students. Strayer University's campuses are
attractive and modern, offering conducive learning environments in
convenient locations.

o ESTABLISHED BRAND NAME AND ALUMNI SUPPORT. With a 110-year operating
history, Strayer University is an established brand name in
post-secondary adult learning, and our students and graduates work
throughout corporate America. Our extensive alumni network (currently
over 19,700 alumni worldwide) and support system fosters additional
recruitment opportunities and assists students with job placement and
career advancement. Strayer University was ranked first in the
Washington Business Journal's 2002 Book of Lists for having the largest
enrollment in graduate business and management programs in the
Washington, D.C. metropolitan area.

COMPANY STRATEGY

Our goal is to be a leading provider of high quality post-secondary
education programs for working adults primarily in the areas of business
administration, accounting and information technology. We consider adult
students to be our primary customers, with the various business and government
organizations that provide tuition assistance to their employees as our
secondary customers. We have identified the following factors as key to
executing our growth strategy:

o ACCELERATE NEW CAMPUS GROWTH. Our goal is to open two to three new
campuses per year (including two to three campuses by fall 2003) by
filling out the Washington, D.C., Maryland, Virginia and North Carolina
areas and by expanding into contiguous states that exhibit strong
enrollment potential. We believe this strategy will leverage our
existing investment in curriculum, management and marketing
infrastructure. Since our initial public offering in 1996, we have
grown from eight campuses to twenty campuses while expanding into two
new states. We opened three new campuses in 2001, in Baltimore,
Maryland and in Chesapeake and Newport News, Virginia. By the spring
2002 quarter, these three new schools had average enrollments ahead of
the growth in average student enrollments we have experienced at new
schools in the past. On July 1, 2002, we began offering classes at
three new campuses in North Carolina (one in Raleigh-Durham and two in
Charlotte). Our new campuses have typically turned profitable after
five to six quarters of operation. Due to strong demand at our
Raleigh-Durham campus, we intend to open a second campus in the
Raleigh-Durham area by fall 2003. We have received approval from the
South Carolina Commission on Higher Education to offer academic
programs at up to three campuses in South Carolina. In addition, the
Committee on Post-Secondary Educational Institutions of the Tennessee
Higher Education Commission recommended authorization of two new
campuses in the State of Tennessee, subject to review and final
approval by the full Commission. We have also applied to operate in
Pennsylvania and Delaware and expect to pursue approval in these states
as part of our multi-year expansion plan.

o CONTINUE OUR GROWTH AT STRAYER ONLINE. We actively market Strayer
ONLINE to U.S. students throughout all 50 states and to international
students on a global basis. Strayer ONLINE has demonstrated its success
with both asynchronous (on demand) and synchronous (real time) course
offerings that are favored by working adult students because of their
quality and convenience. We believe that the added flexibility of being
able to offer both traditional

and online courses allows us to better serve our working adult
students. Due to the convenience and flexibility of online teaching,
this medium has rapidly grown in acceptance and is expected to continue
to enjoy rapid growth. Enrollment at Strayer ONLINE has grown at a
greater than 80% compounded annual growth rate since its inception in
1997. Enrollment in markets outside of commuting distance to a Strayer
University physical campus has grown at a greater than 50% compounded
annual growth rate in this period. There were 6,822 students taking at
least one online course as of the 2002 fall term.

o DEVELOP CORPORATE/INSTITUTIONAL ALLIANCES. We believe we are
well-positioned to pursue significant opportunities in the large
corporate/institutional market. Our convenient evening, weekend and
online courses provide an attractive solution for the education and
training needs of employers and their employees. We currently have
sponsorship and reimbursement arrangements of varying sorts with over
80 corporations and government institutions, including AT&T, Verizon,
General Motors, PEPCO, SallieMae, Northrop Grumman Information
Technology, EDS, UPS, Lockheed Martin, Raytheon, the Defense Logistics
Agency, the National Guard, the District of Columbia, the General
Services Administration, the United States Navy Audit Agency and the
U.S. Department of Energy. In addition, we recently established
partnerships with Alstom Power Company and the Federal Reserve Bank of
Richmond. We are actively working with other institutions to increase
the number of such arrangements.

o CONSIDER SELECTIVE ACQUISITIONS. We periodically evaluate opportunities
to acquire other providers of post-secondary education. When exploring
acquisition opportunities, we seek schools that we believe offer
programs with a good strategic fit to our current curricula and that
have demonstrated compliance with regulatory requirements and
accreditation standards. We also seek out operations that are located
in geographic locations that possess attractive demographic
characteristics. In addition, we also consider other factors such as
price, the availability of financing on acceptable terms, competitive
factors and the opportunity to improve operating performance through
the implementation of our operating strategies. We compare potential
acquisitions to other alternative uses of our capital (including but
not limited to organic growth alternatives, share repurchases and
special or increased dividends) in terms of return on capital and
enhancing shareholder value. We have no current commitments with regard
to potential acquisitions.

STRAYER UNIVERSITY

CURRICULUM

Strayer University offers information technology and business-oriented
curricula to equip students with specialized and practical knowledge and skills
for careers in business, industry and government. Our Academic Curriculum
Committee periodically reviews and revises the University's course offerings to
improve the educational programs and respond to competitive changes in job
markets. In 1993, Strayer University formed a Curriculum Advisory Board. The
composition of the Curriculum Advisory Board varies over time, but typically
consists of Strayer University faculty, current and former Strayer students and
representatives from private and government employers. The Curriculum Advisory
Board supports the program evaluation process and tracks the career progress of
Strayer University alumni. Strayer University uses these studies to make
decisions about curriculum development, resource allocation and faculty
appointments.

Strayer University offers programs in the following areas:

Graduate Programs Undergraduate Programs
--------------------------------------------- ---------------------------------------
o Master of Business Administration o Bachelor of Science (B.S.) Degree
(M.B.A.) Degree
Accounting
o Master of Science (M.S.) Degree Business Administration
Computer Information Systems
Communications Technology Computer Networking
Information Systems Database Technology
Management Information Systems Economics
Professional Accounting International Business
Internetworking Technology
o Executive Graduate Certificate Programs
o Associate in Arts (A.A.) Degree
Business Administration
Computer Information Systems Accounting
Professional Accounting Acquisition and Contract Management
Business Administration
Computer Information Systems
Computer Networking
Database Technology
Economics
General Studies
Internetworking Technology
Marketing

o Undergraduate Diploma Programs

Acquisition and Contract Management
Computer Information Systems
Internetworking Technology
Network Security
Web Development

o Undergraduate Certificate Programs
Accounting
Business Administration
Computer Information Systems

Each undergraduate degree program includes courses in oral and written
communication skills as well as mathematics and various disciplines in the
humanities and social sciences. In addition to our degree, diploma and
certificate programs, we offer classes to non-degree and non-program students
wishing to take courses for personal or professional enrichment.

Although all of our programs are offered at each campus, the University
adapts its course offerings to the preferences of the student population at
each location. Strayer University students may enroll in courses at more than
one campus and take courses online.

Strayer University structures its curricula to allow students to advance
sequentially from one learning level to another by applying 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 or
her original educational objective by taking additional courses leading to an
A.A. degree in computer information systems, a B.S. degree in computer
information systems, and ultimately an M.S. degree in information systems. This
curriculum design provides students a level of competency and a measure of
attainment in the event they interrupt their education or choose to work in
their field of concentration prior to obtaining their final degree.

STRAYER ONLINE

In August 1997, we began the operation of Strayer ONLINE. Through Strayer
ONLINE, the University offers courses and degree programs via the internet
using both synchronous (real time) and asynchronous (on demand) approaches to
online learning. The asynchronous format was first utilized

by the University in the summer 2001 quarter and has grown rapidly due to
increasing demand. Students may take all of their courses solely through
Strayer ONLINE or may take online courses as a supplement to traditional,
site-based courses. A student taking classes through Strayer ONLINE has the
same admission and financial aid requirements, policies and procedures and
receives the same student services as other Strayer University students.
Tuition for Strayer ONLINE courses is the same as for campus courses. During
the fall 2002 quarter, Strayer University had 6,822 students participating in
its online programs, 5,401 of whom took classes solely through Strayer ONLINE.

FACULTY

Strayer University seeks to appoint faculty who hold appropriate academic
credentials, are dedicated, active professionals in their field and are
enthusiastic and committed to teaching working adults. In accordance with our
educational mission, the University faculty focuses its efforts on teaching.
The normal course 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. Strayer University requires full-time faculty members to hold
student counseling hours at least two hours per week for each course they
teach.

We provide financial support for faculty members seeking to update their
skills and knowledge. Strayer University maintains a tuition plan that
typically reimburses instructors enrolled in advanced degree programs for 50%
of the tuition for one new course per term and conducts annual in-house faculty
workshops in each discipline. Strayer University also fully reimburses its
faculty for their costs in receiving computer-related instruction and training
to keep current in information technology developments.

ORGANIZATION OF STRAYER UNIVERSITY

Strayer University organizes its academic programs and administrative
operations on a regional and campus basis. The University's annual financial
budget and overall academic and business decisions are directed by its Board of
Trustees. The Board of Trustees consists of Scott Steffey, Strayer's Executive
Vice President and Chief Operating Officer and former Vice Chancellor of the
State University of New York, and Dr. Donald Stoddard, the University's
President, as well as the following non-mangement members:

Dr. Peter Salins Dr. Salins is Provost and Vice Chancellor for Academic Affairs
and Chief Academic Officer at the State University of New York.

Roland Carey Mr. Carey is a former Director of Strayer and previously served
as an advisor to the Louisa County Public School System of
Virginia and a school Program Coordinator.

Dr. Jennie Seaton Dr. Seaton is a former Director of Strayer and previously served
as Assistant Dean of Virginia Commonwealth University.

Todd A. Milano Mr. Milano is President and Chief Executive Officer of Central
Pennsylvania College and a Director of Strayer.

Dr. Charlotte F. Beason Dr. Beason is the Vice Chair, Commission on Collegiate Nursing
Education and Program Director, U.S. Department of Veterans
Affairs and a Director of Strayer.

G. Thomas Waite, III Mr. Waite is the Chief Financial Officer and Treasurer of The
Humane Society of the United States and a Director of Strayer.

Within the parameters of the academic and financial direction set by its
Board of Trustees, Strayer University is managed on a day-to-day basis by the
University President and Provost as to academic matters, as well as by four
regional managers who are responsible for implementing Board policy and meeting
commercial and budgetary goals for their respective regions. The four regional
managers are:

James F. McCoy -- Regional Director -- Southern Virginia and North Carolina
Michael O. Williams -- Regional Director -- Northern Virginia and
Washington, D.C. Betty Shuford -- Regional Director -- Maryland
Pamela S. Bell -- Director -- Strayer ONLINE

Similarly, at the campus level, the day-to-day campus operations are
managed by a campus manager and the academic functions are overseen by a campus
dean. Each campus is staffed with personnel performing instructional,
admissions, academic advising, financial aid, student services and career
development functions. A learning resource center at each campus supports the
University's instructional programs. Each learning resource center contains a
library and computer laboratories and is operated by a full-time manager and
support staff, who assist students in the use of research resources.

MARKETING

To generate interest among potential students, we engage in a broad range
of activities to inform the working adult public and their employers about the
programs we offer. These activities include: direct mail; internet marketing;
marketing to our existing students; print and broadcast advertising; student
referrals and corporate and government outreach activities. Direct response
methods (direct mail and email advertising) are used to generate inquiries from
potential students and their employers. Strayer University maintains booths and
information tables at appropriate conferences and expos, as well as at transfer
days at community colleges. Through our business-to-business outreach efforts,
we market our programs to corporations with personal sales calls, distribution
of information through corporate intranets and human resource departments and
on-site information meetings. We implement a continuous marketing strategy to
record inquiries in our database and track them through to application and
registration. Additionally, we market to students and alumni with information
about new programs and new locations to encourage them to return for further
education.

STUDENT PROFILE

The majority of Strayer University students are working adults pursuing
their first college degree to improve their job skills and advance their
careers. Of the students enrolled in Strayer University's programs at the
beginning of the 2002 fall quarter, approximately 59% were age 30 or older and
approximately 71% were engaged in a part-time (fewer than three courses each
quarter) course of study. In the 2002 fall quarter, our students registered for
an average of 8.8 course credits (about two classes per student).

Strayer University has a very diverse student body. In 2001, 52% of
students were minorities and 56% of students were women. Approximately 7% of
the University's students were international, including those taking courses
through Strayer ONLINE. Approximately 14% of the University's students have a
military background, either as active duty personnel, veterans or reservists.
Through Strayer ONLINE, the University offered courses to students in all 50
states and 39 foreign countries in 2001. Strayer University prides itself on
making post-secondary education accessible to working adults who missed or were
previously unable to take advantage of education opportunities.

The following is a breakdown of our students by program level at December
31, 2001:

NUMBER PERCENTAGE OF
DEGREE PROGRAMS OF STUDENTS DEGREE STUDENTS
--------------- ----------- ---------------

Bachelors ........................ 8,686 70%
Masters .......................... 2,241 18%
Associates ....................... 1,541 12%
----- --
Total Degree Students ......... 12,468 100%
====== ===

PERCENTAGE OF
NUMBER NON-DEGREE
NON-DEGREE PROGRAMS OF STUDENTS STUDENTS
------------------- ----------- --------

Diploma .............................. 700 45%
Undeclared ........................... 841 55%
--- --
Total Non-Degree Students ......... 1,541 100%
===== ===

STUDENT ADMISSIONS

Strayer University seeks to ensure that incoming students have the
necessary academic background to succeed in their course of study. Students
attending Strayer University's undergraduate programs must possess a high
school diploma or a General Educational Development Certificate. Students
attending Strayer University'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 perform 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, 2002, undergraduate full-time students are
charged at the rate of $220.50 per credit hour. Undergraduate part-time
students are charged at the rate of $231.00 per credit hour. Courses in
graduate programs are charged at the rate of $294.00 per credit hour.
Accordingly, a full-time student seeking to obtain a bachelor's degree in four
years currently would pay approximately $9,900 per year in tuition. Strayer
University implemented a tuition increase of 5% per credit hour effective
January 1, 2002. Under a variety of different programs, Strayer University
offers scholarships and tuition discounts to active and reserve military
students and in connection with various corporate and government sponsorship
and tuition reimbursement arrangements.

SEL PROGRAM

In 1995, we introduced the Strayer Education Loan Program (the "SEL
Program") for eligible students as an alternative to government sponsored
student loans. Education Loan Processing, Inc., a wholly-owned subsidiary,
administers the SEL Program for Strayer University. In addition to serving as
an alternative to the federal loan programs, the SEL Program can service loans
at a competitive cost.

We designed the SEL Program for working adult students. Borrowers make
payments while enrolled, thereby reducing the debt they otherwise would assume
upon completion of their studies. While enrolled at Strayer University, the
minimum monthly payment on the loan is a percentage of the balance each month.
Upon completion of their schooling, students are placed on a fixed payment
plan. The loans generally have maturities ranging from one to four years after
graduation and bear

interest at a rate that is competitive with rates under federal student loan
programs. At December 31, 2001, there were 2,798 loans outstanding with an
aggregate loan balance of approximately $8.9 million and an average individual
loan balance of approximately $3,200.

Loans under the SEL Program are unsecured. Before making loans, we conduct
a credit evaluation and verify the employment of each applicant. Student
defaults on loans extended under the SEL Program have historically approximated
2% of total dollars loaned.

STRAYER FOUNDATION SCHOLARSHIPS

The Strayer University Education Foundation (the "Foundation") was
established by a former majority stockholder of Strayer as an independent
entity to provide scholarships and grant assistance for needy students who wish
to pursue a program of study at Strayer University. The Foundation has a nine
member Board of Trustees, including independent members (as well as Dr.
Stoddard and Mr. Steffey), and oversees a variety of scholarship and grant
programs for students based on eligibility criteria established by the
Foundation's Board of Trustees. The Foundation had $2.3 million in assets at
December 31, 2001 and issued 93 scholarships and other awards totaling
approximately $100,000 in 2001.

CAREER DEVELOPMENT SERVICES

Although most of Strayer University's students are adults who are already
employed, the University actively assists its students and alumni with job
placement and other career-related matters through career development offices
in each region where the University has 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. Strayer University sponsors career fairs in the fall and spring
quarters for students and alumni to discuss career opportunities with companies
and governmental agencies.

We regularly conduct alumni surveys to monitor the career progression of
our graduates and to comply with Middle States and state requirements to
perform outcome assessments. The 2000 alumni survey, which had an approximately
24% overall response rate, indicated that 91% of those responding were
employed. According to the survey, Strayer University's greatest assets, in
order of importance, are campus location, schedule variety, instructor
knowledge, course selection, online courses and small class sizes.

Strayer University students and graduates are employed by a wide range of
companies and many governmental agencies.

EMPLOYEES

As of December 31, 2001, Strayer University employed 486 faculty members,
of whom 116 were full-time and 370 were part-time, and 474 non-faculty staff in
information systems, financial aid, recruitment and admissions, payroll and
human resources, corporate accounting and other administrative functions. Of
the University's non-faculty staff, 365 were employed full-time and 109 were
employed part-time.

INTELLECTUAL PROPERTY

In the ordinary course of its business, Strayer develops many kinds of
intellectual property that are or will be the subject of copyright, trademark,
servicemark, patent, trade secret or other protections. Such intellectual
property includes Strayer's courseware materials for classes taught via the
internet or other distance-learning means and business know-how and internal
processes and procedures developed to respond to the requirements of its
operations and various education regulatory agencies. Strayer also claims a
common law right to the mark "STRAYER" for educational services and has applied
for federal registration of the mark.

PROPERTIES

We have 20 campuses and five other properties, seven of which are owned
and 18 of which are leased. The table set forth below lists each of our
properties.

CAMPUSES OTHER PROPERTIES
-------- ----------------

Alexandria, VA Corporate Headquarters (Arlington, VA)
Anne Arundel County, MD Jessup, MD
Arlington, VA Newington, VA
Chesapeake, VA Strayer ONLINE (Lorton, VA)
Charlotte, NC (two campuses) Washington, D.C. Library/Annex
Chesterfield, VA
Fredericksburg, VA
Henrico County (Glen Allen, VA)
Loudoun (Ashburn, VA)
Manassas, VA
Montgomery County (Germantown, MD)
Newport News, VA
Owings Mills, MD
Prince George's County, MD
Raleigh-Durham, NC
Takoma Park (Washington, D.C.)
Washington, D.C.
White Marsh (Baltimore, MD)
Woodbridge, VA

REGULATION

REGULATORY ENVIRONMENT

The Higher Education Act and the regulations promulgated thereunder
require all higher education institutions that participate in the various Title
IV programs, including Strayer University, both to comply with detailed
substantive and reporting requirements and to undergo periodic regulatory
scrutiny. The Higher Education Act mandates specific regulatory responsibility
for each of the following components of the higher education regulatory triad:
(1) the federal government through the U.S. Department of Education; (2) the
institutional accrediting agencies recognized by the U.S. Secretary of
Education and (3) state higher education regulatory bodies. The regulations,
standards and policies of these regulatory agencies are subject to change.

ACCREDITATION

Strayer University has been institutionally accredited since 1981 by
Middle States, a regional accrediting agency recognized by the U.S. Secretary
of Education. Accreditation is a system for recognizing educational
institutions and their programs for performance, integrity, educational
quality, faculty, physical resources, administrative capability and financial
stability 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, conduct
peer-review evaluations of institutions and professional programs for
accreditation and publicly designate those institutions that meet their
criteria. Accredited schools are subject to periodic review by accrediting
bodies to ensure that such schools maintain the performance, integrity and
quality required for 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 (namely, Delaware, District of

Columbia, Maryland, New Jersey, New York, Pennsylvania, Puerto Rico and U.S.
Virgin Islands). Accreditation by Middle States is an important attribute of
Strayer University. 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 students and corporate and government sponsors under tuition
reimbursement programs look to accreditation for assurance that an institution
maintains quality educational standards. Moreover, institutional accreditation
is necessary to qualify for eligibility for federal student financial
assistance. Middle States reaffirmed our accreditation in 2000 for a ten-year
period.

The accrediting agencies that accredit higher education institutions in
various regions of the United States have recently adopted a "Policy on
Evaluation of Institutions Operating Interregionally." Under that policy both
the "home" regional accreditor and the "host" regional accreditor cooperate to
evaluate an institution that delivers education at a physical site in the host
accreditor's region. Although the home region is solely responsible for final
accreditation actions, as we open campuses in regions outside the Middle States
region, the host regional accreditors also will participate in the
accreditation process of such expansion operations.

STATE LICENSURE

We are authorized to offer our programs, including those offered through
Strayer ONLINE, by the applicable educational regulatory agencies in all states
where our campuses and Strayer ONLINE facilities are located. We are dependent
upon the authorization of each state where we are physically located to allow
us to operate and to grant degrees or diplomas to students in those states. We
are subject to extensive regulation in each of the four jurisdictions (the
District of Columbia, Virginia, Maryland and North Carolina) in which we
currently maintain campuses, and we will be subject to similar extensive
regulation in those additional states in which we may expand our operations in
the future. State laws and regulations affect our operations and may limit our
ability to introduce educational programs or establish new campuses. We are
required by the Higher Education Act to maintain state licensure in each state
where we maintain a campus that participates in Title IV programs.

OTHER APPROVALS

We are approved by appropriate authorities for the education of veterans
and members of the selective reserve and their dependents, as well as for the
rehabilitation of handicapped veterans. In addition, we are authorized by the
Immigration and Naturalization Service (the "INS") of the U.S. Department of
Justice to admit international students for study in the United States subject
to applicable guidelines. The INS, working with the Department of State, is in
the process of instituting a mandatory electronic reporting system for schools
that enroll international students.

FINANCING STUDENT EDUCATION

Students finance their Strayer University education in a variety of ways.
A significant number of students utilize federal financial aid. In addition,
many of our working adult students finance their own education or receive full
or partial tuition reimbursement from their employers. Congress has enacted
several tax credits for students pursuing higher education and has provided for
a tax deduction for interest on student loans and exclusions from income of
certain tuition reimbursement amounts. We also offer a variety of grants, loans
(including loans under the SEL Program), scholarships and work-study programs
as financing options for our students.

In 2001, approximately 44% of Strayer University's students participated
in one or more Title IV programs. A substantial portion (approximately 55% in
2001) of our revenues are derived from tuition financed under Title IV
programs.

Our 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 Higher Education Act as the difference between the cost of
attending a program of study and the amount a student reasonably can 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.

The 1998 amendments to the Higher Education Act that took effect on
October 7, 2000 address an institution's return-of-funds policy with regard to
Title IV programs. Under the new provision, the institution must first
determine the amount of Title IV program funds that the student "earned." If
the student withdraws during the first 60% of any period of enrollment or
payment period, the amount of Title IV program funds that the student earned is
equal to a pro rata portion of the funds for which the student would otherwise
be eligible. If the student withdraws after the 60% point, then the student has
earned 100% of the Title IV program funds. The institution must return to the
appropriate Title IV programs, in a specified order and excluding the Federal
Work-Study Program, the lesser of the unearned Title IV program funds or the
institutional charges incurred by the student for the period multiplied by the
percentage of unearned Title IV program funds. An institution must return
required funds no later than 30 days after the date the institution determines
a student withdrew. If such payments are not timely made, an institution is
subject to adverse action, including the submission of a letter of credit equal
to 25% of the refunds the institution should have made in its most recent
fiscal year. Strayer believes that Strayer University's return-of-funds policy
and practice is consistent with the current Higher Education Act.

TITLE IV PROGRAMS

Strayer University maintains eligibility for its students to participate
in the following Title IV programs:

o Federal Pell Grants. Grants under the Federal Pell Grant ("Pell")
program are available to eligible students based on financial need and
other factors.

o 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.

o 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 Parent Loan for
Undergraduate Students ("PLUS") program, students and their parents can
obtain from lending institutions subsidized and unsubsidized student
loans, which are guaranteed by the federal government. 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 until the student's obligation to repay the
loan begins. Unsubsidized Stafford loans are available to students who
do not qualify for a subsidized Stafford loan or, in some cases, in
addition to a subsidized Stafford loan.

o Federal Direct Student Loans. Under the William D. Ford Federal Direct
Loan Program (the "Direct Loan Program"), the Department of Education
makes loans directly to students rather than guaranteeing loans made by
lending institutions. Strayer University has not originated any loans
under this program, but utilizes other Title IV loan programs.

OTHER FINANCIAL AID PROGRAMS

In addition to Strayer University's own student loan and scholarship
programs, eligible students at Strayer University 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, Strayer University
must comply with specific standards and procedures set forth in the Higher
Education Act and the regulations issued thereunder

by the Department of Education. An institution must, among other things, be
authorized by each state within which it is physically located to offer its
educational programs and maintain institutional accreditation by a recognized
accrediting agency. The institution also must be certified by the Department of
Education to participate in Title IV programs, based on a determination that,
among other things, the institution meets certain standards of administrative
capability and financial responsibility. For purposes of the Title IV programs,
Strayer University and all of its campuses are considered to be a single
"institution of higher education" so that Department of Education requirements
applicable to an "institution of higher education" are applied to all of
Strayer University's campuses in the aggregate rather than on an individual
basis. Strayer University and each of its campuses are currently certified to
participate in Title IV programs.

Congress reauthorizes the Higher Education Act approximately every five
years with the next Congressional review scheduled to take place in 2003. In
addition, Congress reviews and determines appropriations for Title IV programs
on an annual basis. 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. This, in turn, could lead to lower enrollments at Strayer University
or require Strayer University to increase its reliance upon alternative sources
of student financial aid. Given the significant percentage of Strayer
University's revenues that are derived indirectly from the Title IV programs,
the loss of or a significant reduction in Title IV program funds available to
Strayer University's students could have a material adverse effect on Strayer.
In addition, the regulations applicable to Strayer University have been subject
to frequent revisions. If Strayer University were not to continue to comply
with such regulations, such non-compliance may affect the operations of the
University and its ability to participate in Title IV programs. Certain
elements of the regulations applicable to Strayer University are described
below.

INCREASED REGULATORY SCRUTINY

The 1992 amendments to the Higher Education Act 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 post-secondary educational institutions.
The 1998 amendments to the Higher Education Act preserve the Program Integrity
Triad with some refinements. In addition to the Program Integrity Triad, other
participants in Title IV programs, notably student loan guaranty agencies, also
have enforcement authority.

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 comply with all
applicable Title IV program regulations, 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, must submit in a timely manner all reports
and financial statements required by the regulations and must not otherwise
appear to lack administrative capability.

PROVISIONAL CERTIFICATION

In certain circumstances, including a change in ownership resulting in a
change of control, the Department of Education may certify an institution's
continuing eligibility to participate in Title IV programs on a provisional
basis for no more than three years. During the period of provisional
certification, the institution must comply with any additional conditions
included in its program participation agreement. If the Department of Education
determines that a provisionally certified

institution is unable to meet its responsibilities under its program
participation agreement, it may seek to revoke the institution's certification
to participate in Title IV programs with the institution having fewer due
process protections than if it were fully certified.

THIRD PARTY SERVICERS

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. Strayer University has written contracts
with three third-party servicers: Financial Aid Management for Education, Inc.,
Post-secondary Education Assistance Corporation and Weber and Associates, Inc.
The servicers each perform activities related to Strayer University's
participation in Title IV programs, such as certifying FFEL Program loan
applications, preparing reports from Strayer University to the Department of
Education, issuing payments for the Pell and campus-based programs and issuing
and collecting Perkins loans.

FINANCIAL RESPONSIBILITY

The Higher Education Act and Department of Education regulations establish
extensive standards of financial responsibility that institutions such as
Strayer University must satisfy in order to participate in Title IV programs.
These standards generally require that an institution provide the services
described in its official publications and statements, provide the
administrative resources necessary to comply with Title IV requirements and
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.

Department of Education standards utilize a complex formula to assess
financial responsibility. The standards focus on three financial ratios: (1)
equity ratio (which measures the institution's capital resources, ability to
borrow and financial viability); (2) primary reserve ratio (which measures the
institution's financial viability and liquidity) and (3) net income ratio
(which measures the institution's ability to operate at a profit or within its
means). An institution's financial ratios must yield a composite score of at
least 1.5 for the institution to be deemed financially responsible without the
need for further federal oversight. Strayer University has applied the
financial responsibility standards to its audited financial statements as of
and for the year ended December 31, 2001 and calculated a composite score of
3.0, the highest score available. Strayer therefore believes that Strayer
University meets the Department of Education's financial responsibility
standards.

STUDENT LOAN DEFAULTS

Under the Higher Education Act, 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 levels. For each federal fiscal year, a rate of student defaults (known
as a "cohort default rate") is calculated for each institution by determining
the rate at which borrowers who become subject to their repayment obligation in
that federal fiscal year default by the end of the following federal fiscal
year. The Department calculates a single cohort default rate for each federal
fiscal year that includes all current or former student borrowers at the
institution who commenced repayment on any FFEL Program or Direct Loan Program
loan during that year.

The Department issued new regulations effective July 1, 2001 regarding
cohort default rates. Under these regulations, if the Department notifies an
institution that its three most recent cohort default rates are each 25 percent
or greater, the institution's participation in the FFEL Program, Direct Loan
Program and Federal Pell Grant 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
FFEL Program and Direct Loan Program ends 30 days after notification that its
most recent cohort default rate is greater than 40 percent, unless the

institution timely appeals that determination on specified grounds and
according to specified procedures. An institution whose participation ends
under these provisions may not participate in the relevant programs for the
remainder of the fiscal year in which the institution receives the
notification, as well as for the next two fiscal years. The new regulations
also address cohort default rates for institutions that have undergone a change
in status, such as acquisition or merger of institutions and acquisition of
another institution's branches or locations.

If an institution's cohort default rate equals or exceeds 25% in any of
the three most recent federal fiscal years, 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 subject to closer review by the Department of Education
and may be subject to summary adverse action if it violates Title IV program
requirements. Strayer University's cohort default rates on FFEL Program loans
for the 2000, 1999 and 1998 federal fiscal years, the three most recent years
for which this information is available, were 4.7%, 5.6% and 12.1%,
respectively. The average cohort default rates for for-profit institutions
nationally were 9.4%, 9.3% and 11.4% in fiscal years 2000, 1999 and 1998,
respectively.

THE "90/10 RULE"

Under what is commonly referred to as the "90/10 Rule," the Higher
Education Act provides that for-profit institutions, such as Strayer
University, are eligible to participate in Title IV programs only if they
derive no more than 90% of their revenues from Title IV programs, as determined
in accordance with a formula described in the regulations. A for-profit
institution that violates the "90/10 Rule" loses its eligibility to participate
in Title IV programs for at least one year. During 2001, Strayer University
derived 55% 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 and in accordance with the Higher Education Act, the
institution may not 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, admissions or financial aid awarding
activity. Congress is considering legislation, and the Department of Education
recently published proposed regulations, to clarify the incentive payment rule.
Failure to comply with the incentive payment rule could result in loss of
ability to participate in Federal Student Financial Aid programs or financial
penalties. Although there can be no assurance that the Department of Education
would not find deficiencies in Strayer University's present or former employee
compensation and third-party contractual arrangements, Strayer University
believes that its employee compensation and third-party contractual
arrangements comply with the incentive compensation provisions of the Higher
Education Act.

DISTANCE LEARNING AND THE "50% RULES"

Strayer University offers all of its existing degree and diploma programs
through Strayer ONLINE, delivering instruction via internet-based
telecommunications from Strayer's Distance Learning Center in Lorton, Virginia.
Strayer ONLINE has been approved by the applicable regulatory agencies in all
states where our campuses and Strayer ONLINE facilities are located. During the
fall 2002 quarter, Strayer University had 6,822 students taking courses online,
5,401 of whom took classes solely through Strayer ONLINE.

The Higher Education Act excludes from Title IV program participation
institutions at which more than 50% of the institution's courses are offered by
correspondence or at which 50% or more of the institution's students are
enrolled in correspondence courses, except that the Secretary of Education is
authorized to waive this limitation at his/her discretion in the case of
institutions offering two- or four-year programs leading to an associate or
bachelor degree. Department of Education regulations grant an automatic waiver
for these degree-granting institutions if students enrolled in

correspondence courses receive five percent or less of the total Title IV
program funds received by all students enrolled at the institution. In
addition, a student is not eligible for Title IV program funds for a
correspondence course unless such course is at least one academic year in
length or part of a program leading to an associate, bachelor or graduate
degree. The Higher Education Act states that a student enrolled in a course of
instruction at an institution like Strayer University, where at least half of
the programs lead to a degree that is offered in whole or in part through
telecommunications and leads to a recognized certificate for a program of study
of one year or longer, or 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
traditional correspondence courses offered by the institution equals or exceeds
50% of the total number of courses offered by the institution. For purposes of
the 50% rules, a course must be considered as being offered once during an
award year regardless of the number of times it is offered during that year,
and a course that is offered both on campus and online must be considered two
courses for the purpose of determining the total number of courses the
institution provided during an award year. Strayer University's policy is to
ensure that it remains in compliance with the 50% rules by monitoring its
course offerings and ensuring that the number of courses offered through
Strayer ONLINE will not equal or exceed one-half of the total number of courses
offered by Strayer University, calculated as set forth above. Strayer
University does not offer traditional correspondence courses.

COMPLIANCE REVIEWS

Strayer University is subject to announced and unannounced compliance
reviews and audits by various external agencies, including the Department of
Education, its Office of Inspector General, state licensing agencies, guaranty
agencies and accrediting agencies. The Higher Education Act and Department of
Education regulations also require an institution to submit annually a
compliance audit of its administration of the Title IV Programs conducted by an
independent certified public accountant in accordance with Government Auditing
Standards and the Office of Inspector General audit guide.

POTENTIAL EFFECT OF REGULATORY VIOLATIONS

If Strayer University fails to comply with the regulatory standards
governing Title IV programs, the Department of Education could impose one or
more sanctions, including transferring Strayer University to the reimbursement
or cash monitoring system of payment, seeking to require repayment of certain
Title IV funds, requiring the University to post a letter of credit in favor of
the Department of Education as a condition for continued Title IV
certification, taking emergency action against the University, referring the
matter for criminal prosecution or initiating proceedings to impose a fine or
to limit, condition, suspend or terminate the participation of the University
in Title IV programs. In addition, Strayer University's guaranty agencies could
initiate proceedings to limit, suspend or terminate Strayer University's
eligibility to provide guaranteed student loans in the event of certain
regulatory violations. Although there are no such sanctions currently in force,
and Strayer University does not believe any such sanctions or proceedings are
presently contemplated, if such sanctions or proceedings were imposed against
Strayer University and resulted in a substantial curtailment of the
University's participation in Title IV programs, Strayer University would be
materially and adversely affected.

If Strayer University lost its eligibility to participate in Title IV
programs, or if the amount of available federal student financial aid were
reduced, the University 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 University believes that one or more private organizations would be willing
to provide financial assistance to students attending Strayer University, 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. Strayer University 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 Strayer University to participate in Title IV programs would
be expected to have a material adverse effect on Strayer University 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 Strayer University to establish additional
locations and programs. District of Columbia regulations require institutions
to submit an application for an amended license in order to add a new program
or location. The Virginia State Council of Higher Education requires
institutions to obtain approval prior to offering new educational programs at
existing sites or instruction for degree credit at a new site located more than
25 miles or 30 minutes' travel time from an existing location. Maryland law and
regulations require institutions to obtain the approval of the Maryland Higher
Education Commission 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 University does not believe that these standards
will have a material adverse effect on Strayer University or its expansion
plans.

The Higher Education Act requires for-profit 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 additional locations that are exempt from the two-year rule. Such
additional locations may immediately qualify for participation in the Title IV
programs, unless the location was acquired from another institution that has
ceased offering educational programs at that location and has unpaid Title IV
liabilities, and the acquiring institution does not agree to be responsible for
certain liabilities of the acquired institution. 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. Strayer University's expansion plans
assume its continued ability to establish new campuses as additional locations
of Strayer University under such applicable regulations and thereby avoid
incurring the two-year delay in participation in Title IV programs. The loss of
state authorization or accreditation by Strayer University or an existing
campus, or the failure of Strayer University or a new campus to obtain state
authorization or accreditation, would render Strayer University ineligible to
participate in Title IV programs in that state or at that location.

The Department of Education regulations require institutions to report to
the Department of Education a new additional location at which at least 50% of
an eligible program will be offered, if the institution wants to disburse Title
IV program funds to students enrolled at that location. If the institution
participates in Title IV programs under provisional certification, as the
University currently does as a result of its 2001 recapitalization and change
of ownership (see "--Change in Ownership Resulting in a Change of Control"),
and in certain other circumstances, the institution must obtain Department of
Education approval for the new location before providing Title IV assistance to
students at that location. Otherwise, once it reports the location to the
Department of Education, the institution may disburse Title IV program funds to
eligible students at that location if the location is licensed and accredited.
Institutions are responsible for knowing whether they need approval, and
institutions that add locations and disburse Title IV program funds without
having obtained any necessary Department of Education approval may be subject
to administrative repayments and other sanctions. Strayer does not believe that
the Department of Education's regulations will create significant obstacles to
Strayer University's plans to add new campuses.

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, a degree-granting
institution such as Strayer is not obligated to obtain Department of Education

approval of additional programs that lead to an associate, bachelor,
professional or graduate degree at a level already awarded. Similarly, an
institution is not required to obtain advance approval for new programs that
prepare 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 received by the institution in connection with that program.
Strayer does not believe that the Department of Education's regulations will
create significant obstacles to Strayer University's plans to add new programs.

CHANGE IN OWNERSHIP RESULTING IN 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.
Education Licensure Commission requires an institution licensed by it to report
a change in ownership in advance, preferably 90 days, and may require the
institution to apply to amend its license. The applicable laws and regulations
of Maryland do not specifically address reporting of changes in ownership. The
State Council of Higher Education for Virginia requires notice 30 days in
advance of a change in ownership and the filing of an application for approval
of the change within 30 days after the change. The Board of Governors of North
Carolina may require the filing of notice of a change in ownership and an
application for approval of the change. Strayer University'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 Higher Education Act provides that an institution that 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 Higher Education Act provides that the Department of
Education may temporarily, provisionally certify an institution seeking
approval of a change of ownership and control based on preliminary review by
the Department of Education of a materially complete application received by
the Department of Education within ten business days after the transaction. The
Department of Education may continue such temporary, provisional certification
on a month-to-month basis until it has rendered a final decision on the
institution's application. If the Department of Education determines to approve
the application after a change in ownership and control, it issues a
provisional certification, which extends for a period expiring not later than
the end of the third complete award year following the date of provisional
certification. The Higher Education Act 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 Strayer, the
Department of Education regulations implementing the Higher Education Act
define a change in ownership resulting in a change of control as occurring when
a person acquires ownership and control of a corporation such that the
corporation is required to file a Form 8-K with the Securities and Exchange
Commission ("SEC") notifying that agency of the change of control. The
regulations also provide that a change in ownership and control of a publicly
traded corporation occurs if a person who is a controlling stockholder of the
corporation ceases to be a controlling stockholder. A controlling stockholder
is a stockholder who holds or controls through agreement both 25% or more of
the total outstanding voting stock of the corporation and more shares of voting
stock than any other stockholder.

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 after 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. Strayer University currently has INS approval to admit
foreign students for U.S. study, subject to applicable regulations.

Pursuant to federal law providing benefits for veterans and reservists,
the University 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, Maryland, North Carolina and Virginia. In certain
circumstances, state approving agencies may require an institution to obtain
approval for a change in ownership and control.

In order to complete the change of ownership associated with Strayer's
self-tender offer to repurchase common shares and its issuance of its Series A
Preferred Stock to the selling stockholders New Mountain Partners, L.P. (a
private equity fund managed by New Mountain Capital, LLC) and DB Capital
Investors, L.P. (an affiliate of DB Capital Partners, Inc., the merchant
banking arm of Deutsche Bank AG) in March 2001, Strayer University was required
to make a number of submissions to educational regulatory bodies, including,
among others: (1) filing a "substantive change" report with Middle States; (2)
filing an application for approval to participate in federal student financial
aid programs with the Department of Education; (3) filings with the D.C.
Education Licensure Commission, the Maryland Higher Education Commission and
the Virginia State Council of Higher Education; and (4) filings with the INS
and approving agencies for veterans benefits in the District of Columbia,
Maryland and Virginia. All of the applicable agencies approved the transaction,
which closed in May 2001. As is customary for institutions undergoing a change
of ownership resulting in a change of control, the Department of Education
recertified the University on a provisional basis through June 30, 2004.

If Strayer University underwent a change of control that required approval
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 Strayer University'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 Strayer University's
operations. A change that required approval by a state regulatory authority,
Middle States or a federal agency could also delay Strayer University'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 Strayer University's flexibility in future
financing or acquisition transactions. This offering will not represent a
change in control.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to our
directors and executive officers.

NAME AGE POSITION
---- --- --------

DIRECTORS:
Steven B. Klinsky ............... 46 Non-executive Chairman of the Board
Robert S. Silberman ............. 45 Chief Executive Officer, President and Director
Charles Ayres ................... 43 Director
Dr. Charlotte F. Beason ......... 54 Director
William E. Brock ................ 71 Director
David A. Coulter ................ 55 Director
Gary Gensler .................... 45 Director
Robert R. Grusky ................ 45 Director
Todd A. Milano .................. 49 Director
G. Thomas Waite, III ............ 51 Director
J. David Wargo .................. 49 Director

EXECUTIVE OFFICERS:
Scott W. Steffey ................ 41 Executive Vice President and Chief Operating Officer
Mark C. Brown ................... 43 Senior Vice President and Chief Financial Officer
Steven A. McArthur .............. 44 Senior Vice President and General Counsel
Kevin P. O'Reagan ............... 42 Vice President and Chief Technology Officer
Lysa Hlavinka ................... 35 Vice President, Marketing
Robert E. Farmer ................ 64 Vice President, Human Resources, Administration
and Training
Sonya Udler ..................... 34 Vice President, Corporate Communications

DIRECTORS

Mr. Steven B. Klinsky is the Founder and has been the Managing Member and
Chief Executive Officer of New Mountain Capital, LLC since January 2000. From
1987 to June 1999, Mr. Klinsky was a general partner of Forstmann Little & Co.,
a private equity firm. Mr. Klinsky has been non-executive Chairman of the Board
since March 2001. He also serves on the Board of Directors of Surgis, Inc.

Mr. Robert S. Silberman has been President and Chief Executive Officer
since March 2001. Mr. Silberman was Executive in Residence at New Mountain
Capital, LLC from August 2000 to March 2001. From 1995 to 2000, Mr. Silberman
served as President and Chief Operating Officer (and in certain other
capacities) of CalEnergy Company, Inc. From 1993 to 1995, Mr. Silberman was
Assistant to the Chairman and Chief Executive Officer of International Paper
Company. From 1989 to 1993, Mr. Silberman served in several senior positions in
the U.S. Department of Defense, including as Assistant Secretary of the Army.
Mr. Silberman has been a Director of Strayer since March 2001 and is a member
of the Board's Executive Committee. He also serves on the Board of Directors of
Surgis, Inc.

Mr. Charles Ayres has been a Managing Director of DB Capital Partners,
Inc. (the private equity arm of Deutsche Bank AG) and Head of DB Capital
Partners U.S. since 1999. From 1991 to 1999, Mr. Ayres served as a Managing
Partner at McCown DeLeeuw & Co. Mr. Ayres currently serves on the Board of
Directors of Jet Industries, Inc., New Roads, Inc., Prestige Brands
International, Inc. and the Kinetics Group, Inc.

Dr. Charlotte F. Beason has been Vice Chair of the Commission on
Collegiate Nursing Education (an autonomous agency accrediting baccalaureate
and graduate programs in nursing) and Program Director, Nursing Strategic
Healthcare Group, at the U.S. Department of Veterans Affairs since 1996.

Mr. William E. Brock is the Founder and has been Chairman of BRIDGES
Learning Systems, Inc., an education services company, since 1996. From 1988 to
1995, Mr. Brock was the founder and Chairman of the Brock Group, a firm
specializing in international trade, investment and human resources. From 1985
to 1987, Mr. Brock served as the Secretary of Labor. From 1981 to 1985, Mr.
Brock served as the Special Trade Representative. Mr. Brock served as a Senator
from the State of Tennessee from 1971 to 1981. Mr. Brock is also a Director of
On Assignment, Inc., HealthExtras, Inc. and Federal Medical, Inc.

Mr. David A. Coulter has been Vice Chairman, J.P. Morgan Chase & Co. from
December 2000 to the present. Mr. Coulter was Vice Chairman of The Chase
Manhattan Corporation from July 2000 to December 2000. Prior to joining Chase,
Mr. Coulter led the west coast operations of the Beacon Group, a private
investment and strategic advisory firm, and prior to that Mr. Coulter served as
the Chairman and Chief Executive Officer of the BankAmerica Corporation. Mr.
Coulter currently serves on the Board of Directors of PG&E Corporation and
MasterCard International, and he is a Trustee of Carnegie Mellon University.

Mr. Gary Gensler served as Under Secretary of the U.S. Department of the
Treasury from 1999 to 2001, and before that as Assistant Secretary of the
Treasury from 1997 to 1999. From 1988 to 1997, Mr. Gensler was a partner of The
Goldman Sachs Group, L.P., an international investment banking firm where he
served in various capacities including co-head of finance, responsible for
controllers and treasury worldwide. Mr. Gensler is a co-author of "The Great
Mutual Fund Trap." He serves as a Trustee of the Baltimore Museum of Art, the
Bryn Mawr School and The Enterprise Foundation.

Mr. Robert R. Grusky has been a Member of New Mountain Capital, LLC since
January 2000. Since 2000, Mr. Grusky has also been the managing member of the
limited liability company that is the general partner of Hope Capital Partners,
L.P., an investment partnership that invests primarily in public equities. From
1998 to 2000, Mr. Grusky served as President of RSL Investments Corporation.
From 1985 to 1997, with the exception of 1990-1991 when he was on a leave of
absence to serve as a White House Fellow and Assistant for Special Projects to
the Secretary of Defense, Mr. Grusky served in a variety of capacities,
including Vice President at Goldman, Sachs & Co., first in its Merger &
Acquisitions Department and then in its Principal Investment Area. He is also
on the Board of Directors of Surgis, Inc. and a member of the Board of Trustees
of Hackley School and the Multiple Myeloma Research Foundation.

Mr. Todd A. Milano has been President and Chief Executive Officer of
Central Pennsylvania College since 1989.

Mr. G. Thomas Waite, III has been treasurer and Chief Financial Officer of
the Humane Society of the United States since 1993. In 1992, Mr. Waite was the
Director of Commercial Management of The National Housing Partnership.

Mr. J. David Wargo has been a Member of New Mountain Capital, LLC since
January 2000. Since 1993, Mr. Wargo has also been the President of Wargo and
Company, Inc., an investment management company. From 1989 to 1992, Mr. Wargo
was a Managing Director and Senior Analyst of The Putnam Companies, a
Boston-based investment management company. From 1985 to 1989, Mr. Wargo was a
partner and held other positions at Marble Arch Partners. Mr. Wargo is also a
Director of On Command Corporation and OPENTV Corporation.

EXECUTIVE OFFICERS

Scott W. Steffey joined Strayer in March 2001 after serving as an
Executive in Residence at New Mountain Capital, LLC from March 2000 to March
2001. Prior to that, Mr. Steffey served for four years as Vice Chancellor of
the State University of New York, the largest public post-secondary higher
education system in the world. He is also the founder of the Charter Schools
Institute, an organization

that establishes competitive K-12 schools in New York State dedicated to
providing improved educational opportunities for economically disadvantaged
students. Previously, Mr. Steffey held senior management positions at NYNEX
Corporation and American Express Company.

Mark C. Brown joined Strayer in August 2001 as its Senior Vice President
and Chief Financial Officer. Mr. Brown was most recently the Chief Financial
Officer of the Kantar Group, the information and consultancy division of WPP
Group, the multi-national communications services company. Prior to that, for
nearly 12 years, Mr. Brown held a variety of management positions at PepsiCo
Inc. including Director of Corporate Planning for Pepsi Bottling Group and
Business Unit Chief Financial Officer for Pepsi-Cola International. Mr. Brown
is a CPA who started his career with PricewaterhouseCoopers.

Steven A. McArthur joined Strayer in May 2001 as its Senior Vice President
and General Counsel. Mr. McArthur is responsible for oversight of all legal
matters for Strayer and coordinating with other responsible officers on various
regulatory, administrative, employee benefit, real estate, leasing and
insurance matters. Mr. McArthur previously served as Senior Vice President and
General Counsel to MidAmerican Energy Holdings Company, a Fortune 500
diversified holding company, and a number of its public company subsidiaries.
Mr. McArthur has over 17 years' experience advising various public companies in
the areas of regulatory compliance, mergers and acquisitions, financings and
related legal matters.

Kevin P. O'Reagan has been active in the technology field for the past 18
years and joined Strayer in May 2001 as its Vice President and Chief Technology
Officer. Mr. O'Reagan started his career with Andersen Consulting and later
joined Prudential Mortgage as the Director of Technology. He most recently was
the Chief Technology Officer of the RIA Group of the Thompson Corporation. Mr.
O'Reagan has also developed and taught courses at the post-graduate level as an
adjunct faculty member at The Johns Hopkins University in its Information
Technology Program.

Lysa Hlavinka has been working in the for-profit education field for the
past 11 years and joined Strayer in May 2001 as Vice President, Marketing. Ms.
Hlavinka started her career as an account executive at an advertising agency
and joined the University of Phoenix in 1990. As that company grew, Ms.
Hlavinka held positions as Marketing Manager, Director of Administrative
Services, and, most recently, National Director of Advertising. While at the
University of Phoenix, she taught marketing and public relations courses as an
adjunct faculty member.

Robert E. Farmer is Vice President of Human Resources, Administration and
Training of the University, a position to which he was appointed in 2001.
Previously, Mr. Farmer was the University's Director of Operations (in 2000)
and Director of Human Resources for the University, a position he held since
1995. Mr. Farmer was the Campus Coordinator of the University's Arlington
campus from 1992 until 1995, and he was the Director of Admissions at that
campus from 1990 to 1992. Mr. Farmer is a certified Professional in Human
Resources (PHR).

Sonya Udler joined Strayer as its Vice President, Corporate Communications
in July 2002, bringing over 14 years of public relations and marketing
communications experience to Strayer. For the two years prior to joining
Strayer, she served as a public relations and media strategies consultant. She
previously served as Senior Vice President at Young & Associates Inc., a public
relations agency, where she developed communications strategies and media
programs for Bell Atlantic, Siemens, Verizon and other leading technology
companies.

SELLING STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership by the selling stockholders of our common stock as of September 30,
2002 and as adjusted to reflect the sale of 2,000,000 shares of common stock
offered by the selling stockholders. Except as otherwise indicated below, the
persons named in the table have sole voting and investment power with respect
to all shares of common stock held by them.

SHARES OF COMMON SHARES OF SHARES OF COMMON
STOCK BENEFICIALLY COMMON STOCK BENEFICIALLY
OWNED PRIOR TO THE STOCK BEING OWNED AFTER THE
OFFERING(1) OFFERED OFFERING(2)
----------------------- ------------- ------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER NUMBER PERCENT
------------------------ ----------- --------- ------------- ----------- ----------

New Mountain Partners, L.P. (3)(4)(5) .......... 5,369,965 37.4% 1,700,000 3,669,965 25.6%
DB Capital Partners, Inc. (5)(6)(7)(8) ......... 1,633,903 11.4% 300,000 1,333,903 9.3%

----------

(1) Based on 8,352,412 shares of common stock outstanding as of September 30,
2002 and includes 6,003,869 shares of common stock issuable upon
conversion of the Series A Preferred Stock as of September 30, 2002.

(2) Based on 10,352,412 shares of common stock outstanding as of September
30, 2002 and includes 4,003,869 shares of common stock issuable upon
conversion of the Series A Preferred Stock as of September 30, 2002,
after giving effect to this offering.

(3) Based on a Schedule 13D/A filed with the SEC dated October 8, 2002.
Includes 767,000 shares of common stock owned by Ron K. and Beverly
Bailey and their affiliated foundations, which New Mountain has the
option to purchase under a currently exercisable option at $30.00 per
share. Includes 4,602,965 shares issuable upon conversion of the Series A
Preferred Stock owned by New Mountain.

(4) New Mountain's address is 712 Fifth Avenue, 23rd Floor, New York, NY
10019. New Mountain Investments, L.P. ("NMI") is New Mountain's general
partner and New Mountain GP, LLC ("NM") is NMI's general partner. Steven
B. Klinsky, the Chairman of the Board of Directors of Strayer, is the
sole member of NM. Robert R. Grusky and J. David Wargo, directors of
Strayer, are limited partners of NMI. Mr. Klinsky, Mr. Grusky and Mr.
Wargo disclaim beneficial ownership of the shares owned by New Mountain,
except to the extent of their pecuniary interests therein.

(5) See "Description of Capital Stock -- Other Terms of Series A Preferred
Stock -- Corporate Governance" for a description of the selling
stockholders' rights, as holders of the Series A Preferred Stock, to
elect members of our Board of Directors. Due to the voting agreement
contained in the shareholders' agreement between New Mountain and DB
Capital, New Mountain and DB Capital may be deemed to beneficially own
each other's shares.

(6) Based on a Schedule 13D/A filed with the SEC dated October 9, 2002.
Includes 233,000 shares of common stock owned by Ron K. and Beverly
Bailey and their affiliated foundations, which DB Capital Investors, L.P.
has the option to purchase under a currently exercisable option at $30.00
per share. Includes 1,400,903 shares issuable upon conversion of the
Series A Preferred Stock owned by DB Capital Investors, L.P.

(7) DB Capital's address is 31 West 52nd Street, 26th Floor, New York, NY
10019. Charles Ayres, a director of Strayer, disclaims beneficial
ownership of the shares owned by DB Capital, except to the extent of his
pecuniary interest therein.

(8) Assumes no exercise of the underwriters' over-allotment option. DB
Capital has granted the underwriters an option to purchase 300,000 shares
of common stock issuable upon conversion of its Series A Preferred Stock
to cover the underwriters' over-allotment option. Assuming such option is
exercised in full, DB Capital would beneficially own 1,033,903 shares, or
approximately 7.2% of our common stock, after completion of this
offering.

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of (1) 20,000,000 shares of common
stock, par value $0.01 per share, of which 8,352,412 shares were issued and
outstanding as of September 30, 2002, and (2) 8,000,000 shares of preferred
stock, par value $0.01 per share. Of these preferred shares, 6,000,000 have
been designated for issuance as Series A Preferred Stock, of which 6,003,869
shares were issued and outstanding or accrued as of September 30, 2002.

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 for that purpose. Strayer 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 Strayer, 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.

PREFERRED STOCK

In May 2001, Strayer underwent a $150 million recapitalization and change
of control transaction in which it issued 5,769,231 shares of its Series A
Preferred Stock to the selling stockholders. Strayer used the $150 million,
together with approximately $36.4 million of its cash and marketable
securities, to repurchase 7,175,000 shares of outstanding common stock from its
then chief executive officer and majority stockholder at $25.00 per share. The
Series A Preferred Stock has an effective dividend yield of 5.43% and is
convertible into common stock at a price of $26.00 per share, subject to
adjustment under certain circumstances. In addition, the Series A Preferred
Stock has the following material terms:

AUTHORIZED

A total of 6,000,000 shares of Series A Preferred Stock, par value $.01
per share, have been authorized. Strayer issued 5,769,231 shares of Series A
Preferred Stock in the May 2001 recapitalization and through September 30, 2002
has accrued an additional 234,638 shares of Series A Preferred Stock as
dividends in kind.

RANKING

The shares of Series A Preferred Stock rank, as to dividends, redemption
payments and rights upon liquidation, dissolution or winding up, senior to the
shares of common stock and on a parity with each other.

DIVIDENDS

The holders of shares of Series A Preferred Stock are entitled to receive
dividends prior to any amounts being paid on the shares of common stock when,
as and if declared by the Board of Directors out of funds legally available
therefor. Dividends on the Series A Preferred Stock are payable as follows:

o From the original issuance date of the Series A Preferred Stock until
May 15, 2006, dividends accrue at an annual rate of 7.0% of the sum of
the liquidation amount, which is $26.00 per share (subject to
adjustment), plus any accumulated and unpaid dividends, with 3.5%
payable in cash when the dividend is declared and the remaining 3.5%
accumulating and compounding quarterly until the Series A Preferred
Stock either converts, is redeemed or a liquidation event occurs.

o Beginning on May 16, 2006, dividends will accrue at an annual rate of
3.0% of the sum of the liquidation amount plus any accumulated and
unpaid dividends, all of which will be payable in cash on a quarterly
basis when the dividend is declared.

In addition, when and if the Board of Directors declares regular quarterly
dividends on the common stock up to $0.065 per share, holders of Series A
Preferred Stock are not entitled to participate in the common stock dividend.
However, the Series A Preferred Stock will participate on an as-converted basis
in any dividends on the common stock in excess of the regular quarterly
dividends of $0.065 per share.

CONVERSION AT THE OPTION OF THE HOLDER

The shares of Series A Preferred Stock are initially convertible, in whole
or in part, at the option of the holder, into shares of common stock at a
conversion rate of one share of common stock for each share of Series A
Preferred Stock, subject to adjustment for certain events, including stock
splits, stock dividends and dilutive issuances of capital stock.

LIQUIDATION RIGHTS

Upon any liquidation, dissolution or winding up of Strayer, the holders of
Series A Preferred Stock are entitled to a liquidation preference, prior to any
amounts being paid on the common stock, in an amount equal to the greater of
(1) the sum of $26.00 per share of Series A Preferred Stock plus accumulated
and unpaid dividends to the payment date (in each case, as adjusted for stock
dividends, stock combinations, or similar events) and (2) the product of (a)
the price of the common stock calculated as the average of the daily closing
prices for the common stock for five consecutive trading days selected by the
Board of Directors out of the 20 trading days preceding the date of the
liquidation, dissolution or winding up and (b) the number of shares of common
stock which the holders of Series A Preferred Stock would have been entitled to
receive if they had converted their shares.

CHANGE OF CONTROL

Upon any change of control of Strayer, the holders of Series A Preferred
Stock are entitled, in each holder's sole discretion, to elect to receive the
liquidation amount per share plus accumulated and unpaid dividends to the
payment date. If no election is made, the holders will retain their shares of
Series A Preferred Stock.

Our charter prohibits us from entering into most change of control
transactions unless the transaction provides that the holders of Series A
Preferred Stock have the right to convert such shares into the same kind and
amount of securities, cash and other property that such holder would have
received if the Series A Preferred Stock had been converted into common stock
immediately prior to the proposed transaction. If the consideration to be
received by the holders of common stock in a proposed transaction is less than
the adjusted conversion price for the Series A Preferred Stock in effect at the
time of the transaction, then the holders of Series A Preferred Stock would be
entitled, immediately prior to the proposed transaction, to convert such Series
A Preferred Stock into common stock at a per share conversion price equal to
99% of the consideration to be received in the proposed transaction by the
holders of common stock.

VOTING RIGHTS

Each holder of Series A Preferred Stock is entitled to the number of votes
per share equal to the number of whole shares of common stock into which all of
the holder's shares of Series A Preferred Stock are convertible with respect to
all matters submitted for stockholder approval. Except as provided by law or by
the express terms of the Series A Preferred Stock, holders of Series A
Preferred Stock vote together with holders of the common stock as a single
class. For so long as there are any shares of Series A Preferred Stock
outstanding, the approval of the holders of at least a majority of the Series A
Preferred Stock will be required to take certain actions including:

o Any reclassification of the Series A Preferred Stock or any amendment,
alteration or repeal of any provision of our charter or bylaws that
adversely affects the dividend or liquidation preferences, voting
powers or other rights of the holders of the Series A Preferred Stock;

o The authorization, creation or issuance of additional equity securities
ranking senior to or on par with the Series A Preferred Stock with
respect to liquidation or distributions, or any security convertible
into, or which provides a right to acquire, a senior or pari passu
security;

o Any issuance of shares of common stock at a per share price equal to or
less than $26.00, subject to certain adjustments, or securities
convertible into or exchangeable for common stock at a per share
conversion or exchange price equal to or less than $26.00; and

o The declaration, payment or making of any dividend or distribution on
the common stock other than our regular quarterly dividend of $0.065
per share of common stock subject to nominal increases consistent with
past practices.

REDEMPTION AT STRAYER'S OPTION

The Series A Preferred Stock may not be redeemed at our option until May
15, 2004. From and after the third year until the fifth year that the Series A
Preferred Stock is outstanding, so long as the common stock is listed on the
New York Stock Exchange or the Nasdaq National Market, Strayer may redeem
shares of the Series A Preferred Stock, in whole or in part, within 45 days of
any period in which the closing price of the common stock for at least 20
consecutive trading days equals or exceeds 200% of the conversion price, which
is initially $26.00 per share; provided that the 20-day period may not begin
before May 15, 2004. After May 15, 2006, Strayer may redeem the Series A
Preferred Stock, in whole or in part, at the discretion of the majority of the
members of the Board of Directors who are not elected by the holders of the
Series A Preferred Stock. In either case, the redemption price of each share of
Series A Preferred Stock is equal to the liquidation amount, plus accumulated
and unpaid dividends to the redemption date. The decision to redeem the Series
A Preferred Stock is to be made in the discretion of the directors not elected
by the holders of the Series A Preferred Stock.

REDEMPTION AT THE OPTION OF THE HOLDER

The holders of the Series A Preferred Stock have the right to require
Strayer to redeem their shares only:

o After the tenth anniversary of the original issuance of the shares (May
15, 2011);

o Upon a change of control of Strayer; or

o In the event Strayer sells all or substantially all of its assets.

Upon the occurrence of any of these events, a holder of Series A Preferred
Stock may require us to redeem all or a part of that holder's shares of Series
A Preferred Stock, at a purchase price in cash equal to the liquidation amount,
as adjusted, of each share to be redeemed plus accumulated and unpaid dividends
to the redemption date.

REGISTRATION RIGHTS

DEMAND REGISTRATION

Strayer has agreed, pursuant to a Registration Rights Agreement dated as
of May 15, 2001 with the selling stockholders, that if it is not eligible to
use the short-form registration statement, Form S-3 (as it currently is), it
will register the resale of the securities held by the selling stockholders
upon their request, as follows:

o Strayer will not register the resale of securities more than two times;

o Strayer will not register the resale of securities more than once
during any six-month period; and

o The aggregate offering price of the resale of securities must be at
least $10 million.

However, if it is eligible to use the short-form registration statement,
Form S-3, the selling stockholders will also have the right to request
registration on that form two times during any one year for a "shelf"
registration permitted by Rule 415 under the Securities Act. A majority of the
holders of the securities originally issued to the selling stockholders is
required to request the "shelf" registration.

If Strayer's Board of Directors determines that filing a requested
registration statement would result in a disclosure of information that would
materially and adversely affect any proposed or pending material transaction,
Strayer may delay the registration. No postponement may exceed 90 days and all
postponements shall not exceed 120 days in the aggregate in any 12-month
period.

Strayer may register securities for its own account or for the account of
other stockholders in a registration requested by the selling stockholders, so
long as the inclusion of additional securities does not reduce the amount of
securities that may be sold by the selling stockholders.

Securities registrable under the Registration Rights Agreement include the
Series A Preferred Stock, the common stock and other securities, if any,
issuable upon conversion of the Series A Preferred Stock, the common stock, if
any, purchased by the selling stockholders in accordance with the option
granted to them by our former chief executive officer and majority stockholder,
and any securities issued to the selling stockholders in accordance with their
preemptive rights.

PIGGY-BACK REGISTRATION

Strayer has granted the selling stockholders unlimited piggy-back
registration rights. Piggy-back registration means the rights of the holders of
the registration rights to include their shares in a registration filed by
Strayer for its own account or in a registration Strayer has filed upon the
request of other stockholders.

EXPENSES

Strayer will bear all the expenses of the registration, other than any
fees and disbursements of the underwriters that are customarily borne by
selling stockholders and all underwriting discounts, commissions and transfer
taxes relating to the securities sold by the selling stockholders.

INDEMNIFICATION

Strayer has agreed to indemnify the selling stockholders against any
losses, including fees and other expenses, which may arise out of an untrue
statement or an omission of a material fact in any registration statement,
other than untrue statements or omissions of material facts made in or omitted
from the registration statement made in reliance on written information
furnished by the selling stockholders to Strayer for use in the registration
statement. Each selling stockholder, severally and not jointly, has agreed to
indemnify Strayer against any losses that may arise out of any untrue statement
or omissions of material facts made in or omitted from the registration
statement in reliance on written information furnished by the selling
stockholders to Strayer for use in the registration statement. The amounts owed
by the selling stockholders under this indemnification obligation shall not
exceed the proceeds the selling stockholders received from the sale of
securities under the registration statement.

TRANSFERABILITY OF REGISTRATION RIGHTS

The selling stockholders may freely transfer the registration rights to
any of their affiliates. The selling stockholders may also transfer the
registration rights to any other person to whom the selling stockholders or
their affiliates transfer shares of Series A Preferred Stock or the common
stock into which the Series A Preferred Stock converts having an aggregate
purchase price or liquidation amount of at least $10 million.

OTHER TERMS OF SERIES A PREFERRED STOCK

CORPORATE GOVERNANCE

Pursuant to the terms of the Series A Preferred Stock, the holders of the
Series A Preferred Stock are initially entitled to elect one-half of the
members of Strayer's Board of Directors. The percentage of Strayer's Board of
Directors that the holders of the Series A Preferred Stock may elect decreases
as the number of shares of Series A Preferred Stock outstanding decreases in
the following manner:

% OF SERIES A PREFERRED STOCK % OR NUMBER OF
ORIGINALLY ISSUED STILL OUTSTANDING DIRECTORS
----------------------------------- ---------

90% and above ................ 50%
50% to 89.9% ................. 40%
25% to 49.9% ................. 25%
10% to 24.9% ................. At least one member
0% to 9.9% ................... none

So long as at least 10% of the Series A Preferred Stock originally issued
remains outstanding, each committee of the Board of Directors, the board of
directors of any subsidiary of Strayer and each committee of any such
subsidiary's board of directors shall include a proportionate number of
directors nominated by the holders of the Series A Preferred Stock.

Pursuant to the terms of the Series A Preferred Stock, Strayer's Board of
Directors consists of six members elected by the preferred stockholders,
including Steven B. Klinsky, Charles Ayres, David A. Coulter, Gary Gensler,
Robert R. Grusky and J. David Wargo. Following the completion of this offering,
approximately 65% of the Series A Preferred Stock originally issued will remain
outstanding (assuming no exercise of the underwriters' over-allotment option).
Accordingly, the percentage of members of the Board of Directors that the
holders of the Series A Preferred Stock are entitled to elect will be reduced
to 40%. As a result, in connection with this offering, Strayer has been
informed that the selling stockholders expect to agree that following the
completion of this offering, Charles Ayres, a designee of DB Capital, will
resign from the Board of Directors, and that New Mountain will then have the
right to elect all of the members of Strayer's Board of Directors that the
holders of the Series A Preferred Stock are entitled to elect.

In addition, in the event that Strayer fails to pay the redemption price
for the Series A Preferred Stock in connection with a proper redemption request
in an amount at least equal to $30 million, the holders of the Series A
Preferred Stock will be able to elect a majority of Strayer's Board of
Directors until the redemption price is paid.

Any significant changes in Strayer's ownership and control could require
Department of Education or other regulatory agency approval.

In addition to any other Board of Directors or stockholder action that may
be required, the approval of a majority of the directors elected by the holders
of the Series A Preferred Stock will be required in order for Strayer to take
certain actions, including:

o Any authorization or issuance, reclassification, repurchase, redemption
or other acquisition of any of our equity securities or any rights,
warrants, options or other securities exercisable for or convertible
into any equity securities;

o Any issuance or incurrence of indebtedness that would result in Strayer
having in excess of an aggregate of $25 million of indebtedness
outstanding;

o Any liquidation, dissolution, winding up or reorganization of Strayer;

o Any transaction or series of related transactions involving a change of
control or the sale of all or substantially all of Strayer's equity or
assets, or any acquisition, disposition or other business combination
involving consideration in excess of $20 million;

o Any amendment to Strayer's charter or bylaws; and

o The removal or replacement of, or the establishment of the level or
form of compensation payable to, Strayer's chief executive officer,
chief operating officer or chief financial officer.

PREEMPTIVE RIGHTS

So long as the selling stockholders own Series A Preferred Stock and/or
shares of common stock representing (on an as-converted basis) at least 50% of
the shares of the Series A Preferred Stock originally issued to the selling
stockholders, the selling stockholders have the right to purchase their pro
rata portion of new equity securities that Strayer issues, other than certain
exempt issuances.

OPTIONS

As of September 30, 2002, there were 970,000 shares of our common stock
issuable upon exercise of outstanding stock options, of which 293,333 are
exercisable and 676,667 are currently not exercisable, and 579,405 shares of
our common stock reserved for future issuance under our existing stock option
plan. The outstanding options have a weighted average life of six years and a
weighted average exercise price of $37.09 per share.

AUTHORIZED BUT UNISSUED CAPITAL STOCK

The requirements of Nasdaq, which will apply so long as our common stock
remains traded on Nasdaq, require stockholder approval of certain issuances of
stock equal to or exceeding 20% of then-outstanding voting power or
then-outstanding number of shares of common stock. These additional shares may
be used for a variety of corporate purposes, including future public offerings,
to raise additional capital or to facilitate acquisitions.

One of the effects of the existence of unissued and unreserved common
stock or preferred stock may be to enable our board of directors to issue
shares to persons friendly to current management, which issuance could render
more difficult or discourage an attempt to obtain control of our company by
means of a merger, tender offer, proxy contest or otherwise, and thereby
protect the continuity of our management and possibly deprive the stockholders
of opportunities to sell their shares of common stock at prices higher than
prevailing market prices.

CERTAIN CHARTER AND BYLAW PROVISIONS

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

VOTING REQUIREMENTS

Strayer's charter may not be amended without the affirmative vote of a
majority of the votes entitled to be cast generally in the election of
directors, voting as a single voting group. Strayer's bylaws may be amended
either by the affirmative vote of a majority of all votes entitled to be cast
generally in the election of directors, voting as a single group, or by an
affirmative vote of a majority of Strayer'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 Strayer'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 shall be liable to the corporation or to any
stockholder for money damages except to the extent that:

o it is proved that the director or officer 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

o a judgment or other final adjudication adverse to the director or
officer is entered in a proceeding based on a finding in the proceeding
that the director's or officer'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.

Strayer's charter has incorporated the provisions of this law limiting the
liability of directors and officers.

Strayer's bylaws require it to indemnify:

o 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

o any present or former director or officer against any claim or
liability unless it is established that:

o his act or omission was committed in bad faith or was the result
of active or deliberate dishonesty;

o he actually received an improper personal benefit in money,
property or services; or

o in the case of a criminal proceeding, he had reasonable cause to
believe that his act or omission was unlawful.

In addition, Strayer'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 Strayer shall have received:

o 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 Strayer as authorized by the bylaws; and

o a written understanding by or on his behalf to repay the amount paid or
reimbursed by Strayer if it shall ultimately be determined that the
standard of conduct was not met.

Strayer's bylaws also:

o 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

o permit Strayer to provide directors, officers and stockholders 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

Strayer has elected to include provisions in its charter 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.

LISTING

Strayer's common stock is traded on the Nasdaq National Market under the
symbol "STRA."

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2002, the selling stockholders have agreed to sell to
the underwriters named below, for whom Credit Suisse First Boston Corporation,
Banc of America Securities LLC and Legg Mason Wood Walker, Incorporated are
acting as representatives, the following respective numbers of shares of common
stock:

NUMBER
OF SHARES
UNDERWRITER ---------

Credit Suisse First Boston Corporation ........................
Banc of America Securities LLC ................................
Legg Mason Wood Walker, Incorporated .......................... ---------
Total ........................................................ 2,000,000
=========

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that, if an underwriter defaults, the
purchase commitments of the non-defaulting underwriters may be increased or the
offering may be terminated.

DB Capital has granted to the underwriters a 30-day option to purchase on
a pro rata basis up to 300,000 additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a selling concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share on
sales to other broker/dealers. After the public offering the representatives
may change the public offering price and concession and discount to
broker/dealers.

The following table summarizes the compensation the selling stockholders
will pay and the estimated expenses we will pay:

PER SHARE TOTAL
--------------------------------- --------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
---------------- ---------------- ---------------- ---------------

Underwriting discounts and commissions
paid by the selling stockholders ........ $ $ $ $
Expenses payable by us ................... $ $ $ $

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the SEC a
registration statement under the Securities Act relating to any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any shares of our common stock, or publicly disclose the intention to make any
offer, sale, pledge, disposition or filing, without the prior written consent
of Credit Suisse First Boston Corporation, for a period of 90 days after the
date of this prospectus, except that such restrictions shall not apply to (1)
our ability to grant employee or director stock options pursuant to the terms
of a plan in effect on the date of this prospectus, (2) the issuance of common
stock pursuant to the exercise of such options or upon conversion of our
outstanding preferred stock or (3) the issuance of common stock pursuant to our
existing employee stock purchase or dividend reinvestment plans.

Subject to certain exceptions, our executive officers and directors and
the selling stockholders have agreed that they will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any shares of
our common stock or securities convertible into or exchangeable or exercisable
for any shares of our common stock, enter into a transaction that would have
the same

effect, or enter into any swap, hedge or other arrangement that transfers, in
whole or in part, any of the economic consequences of ownership of our common
stock, whether any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or publicly disclose
the intention to make any offer, sale, pledge or disposition, or to enter into
any transaction, swap, hedge or other arrangement, without, in each case, the
prior written consent of Credit Suisse First Boston Corporation, for a period
of 90 days after the date of this prospectus.

We and the selling stockholders have agreed to indemnify the underwriters
against some liabilities under the Securities Act, or to contribute to payments
which the underwriters may be required to make in that respect.

Bank of America, N.A., an affiliate of Banc of America Securities LLC, is
the lender under one of our undrawn credit facilities. Banc of America
Securities LLC and the other underwriters may, from time to time, engage in
transactions with and perform services for us in the ordinary course of
business.

Our common stock is traded on the Nasdaq National Market under the symbol
"STRA."

In connection with the offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate covering
transactions, penalty bids and passive market-making in accordance with
Regulation M under the Exchange Act.

o Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.

o Over-allotment involves sales by the underwriters of shares in excess
of the number of shares the underwriters are obligated to purchase,
which creates a syndicate short position. The short position may be
either a covered short position or a naked short position. In a covered
short position, the number of shares over-allotted by the underwriters
is not greater than the number of shares that they may purchase in the
over-allotment option. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
option. The underwriters may close out any covered short position by
either exercising their over-allotment option and/or purchasing shares
in the open market.

o Syndicate-covering transactions involve purchases of the common stock
in the open market after the distribution has been completed in order
to cover syndicate short positions. In determining the source of shares
to close out the short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase shares
through the over-allotment option. If the underwriters sell more shares
than could be covered by the over-allotment option -- a naked short
position -- the position can only be closed out by buying shares in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there could be downward pressure on the
price of the shares in the open market after pricing that could
adversely affect investors who purchase in the offering.

o Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate-covering
transaction to cover syndicate short positions.

o In passive market-making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to limitations,
make bids for or purchases of our common stock until the time, if any,
at which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions and
penalty bids may have the effect of raising or maintaining the market price of
our common stock or preventing or retarding a decline in the market price of
the common stock. As a result, the price of the common stock may be higher than
the price that might otherwise exist in the open market. These transactions may
be effected on the Nasdaq National Market or otherwise and, if commenced, may
be discontinued at any time.

A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters or selling group members, if any,
participating in this offering. The representatives may agree to allocate a
number of shares to underwriters and selling group members for sale to their
online brokerage account holders. Internet distributions will be allocated by
the underwriters and selling group members that will make internet
distributions on the same basis as other allocations.

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
stockholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are made. Any resale
of the common stock in Canada must be made under applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made under available statutory exemptions or under a
discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the common stock.

REPRESENTATIONS OF PURCHASERS

By purchasing common stock in Canada and accepting a purchase
confirmation, a purchaser is representing to us and the selling stockholders
and the dealer from whom the purchase confirmation is received that:

o the purchaser is entitled under applicable provincial securities laws
to purchase the common stock without the benefit of a prospectus
qualified under those securities laws;

o where required by law, that the purchaser is purchasing as principal
and not as agent; and

o the purchaser has reviewed the text above under "Resale Restrictions."

RIGHTS OF ACTION -- ONTARIO PURCHASERS ONLY

Under Ontario securities legislation, a purchaser who purchases a security
offered by this prospectus during the period of distribution will have a
statutory right of action for damages, or while still the owner of the common
stock, for rescission against us and the selling stockholders in the event that
this prospectus contains a misrepresentation. A purchaser will be deemed to
have relied on the misrepresentation. The right of action for damages is
exercisable not later than the earlier of 180 days from the date the purchaser
first had knowledge of the facts giving rise to the cause of action and three
years from the date on which payment is made for the common stock. The right of
action for rescission is exercisable not later than 180 days from the date on
which payment is made for the common stock. If a purchaser elects to exercise
the right of action for rescission, the purchaser will have no right of action
for damages against us or the selling stockholders. In no case will the amount
recoverable in any action exceed the price at which the common stock were
offered to the purchaser and if the purchaser is shown to have purchased the
securities with knowledge of the misrepresentation, we and the selling
stockholders will have no liability. In the case of an action for damages, we
and the selling stockholders will not be liable for all or any portion of the
damages that are proven to not represent the depreciation in value of the
common stock as a result of the misrepresentation relied upon. These rights are
in addition to, and without derogation from, any other rights or remedies
available at law to an Ontario purchaser. The foregoing is a summary of the
rights available to an Ontario purchaser. Ontario purchasers should refer to
the complete text of the relevant statutory provisions.

ENFORCEMENT OF LEGAL RIGHTS

All of our directors and officers, as well as the experts named herein and
the selling stockholders, may be located outside of Canada and, as a result, it
may not be possible for Canadian purchasers to

effect service of process within Canada upon us or those persons. All or a
substantial portion of our assets and the assets of those persons may be
located outside of Canada and, as a result, it may not be possible to satisfy a
judgment against us or those persons in Canada or to enforce a judgment
obtained in Canadian courts against us or those persons outside of Canada.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal
advisors with respect to the tax consequence of an investment in the common
stock in their particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian legislation.

LEGAL MATTERS

The validity of the issuance of the shares of common stock to be sold in
the offering will be passed upon for us by our special Maryland counsel,
Venable, Baetjer and Howard, LLP, Baltimore, Maryland. Certain legal matters in
connection with the offering will be passed upon for us by Willkie Farr &
Gallagher, New York, New York. The underwriters are represented by Mayer,
Brown, Rowe & Maw, Chicago, Illinois.

EXPERTS

The consolidated financial statements of Strayer Education, Inc. as of
December 31, 2001 and 2000 and for each of the three years in the period ended
December 31, 2001 included in and incorporated by reference in this
registration statement on Form S-3 have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements and other information with the SEC which
you can read at the SEC's website at http://www.sec.gov or on our website at
www.strayereducation.com. You can also read these documents at the SEC's public
reference room, Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549. Please call the SEC toll free at 1-800-SEC-0330 for information
about its public reference room.

We have filed a registration statement with the SEC on Form S-3 under the
Securities Act. This prospectus does not contain all of the information in the
registration statement. We have omitted certain parts of the registration
statement as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's website
and public reference facilities. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be part of this
prospectus, except for any information that is superseded by information that
is included directly in this document or in a more recent incorporated
document.

This prospectus incorporates by reference the documents listed below that
we have previously filed with the SEC. The documents contain important
information about us and our financial condition.

o Our Annual Report on Form 10-K for the fiscal year ended December 31,
2001 filed on March 28, 2002.

o Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2002
filed on May 8, 2002.

o Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002
filed on August 5, 2002.

o Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2002 filed on November 1, 2002.

o Our Current Reports on Form 8-K, dated February 15, 2002, March 12,
2002, March 18, 2002, May 3, 2002, May 23, 2002, August 5, 2002, August
22, 2002, October 8, 2002 and November 1, 2002.

o The description of our common stock contained in our Registration
Statement on Form 8-A filed on July 18, 1996.

We incorporate by reference any future filings we make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this
prospectus and the date all of the securities offered hereby are sold (other
than Current Reports on Form 8-K containing only Regulation FD disclosure
furnished under Item 9 of Form 8-K and exhibits relating to such disclosures,
unless otherwise specifically stated in such Current Report on Form 8-K).

You can obtain any of the documents incorporated by reference in this
prospectus from us, or from the SEC through the SEC's website as described
above. Documents incorporated by reference are available from us without
charge, excluding any exhibits to those documents, unless the exhibit is
specifically incorporated by reference in this prospectus. You can obtain
documents incorporated by reference in this prospectus by requesting them from
us in writing or by telephone as described above.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

STRAYER EDUCATION, INC.

PAGE
-----

UNAUDITED INTERIM FINANCIAL STATEMENTS:

Condensed Consolidated Balance Sheets as of December 31, 2001 and September 30,
2002 ........................................................................... F-2

Condensed Consolidated Statements of Income for the Nine Months Ended
September 30, 2001 and 2002 .................................................... F-3

Condensed Consolidated Statements of Comprehensive Income for the Nine Months
Ended September 30, 2001 and 2002 .............................................. F-4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2001 and 2002 .................................................... F-5

Notes to Condensed Consolidated Financial Statements ............................ F-6

AUDITED FINANCIAL STATEMENTS:

Report of Independent Accountants ............................................... F-11

Consolidated Balance Sheets as of December 31, 2000 and 2001 .................... F-12

Consolidated Statements of Income for the Years Ended December 31, 1999, 2000 and
2001 ........................................................................... F-13

Consolidated Statements of Comprehensive Income for the Years Ended December 31,
1999, 2000 and 2001 ............................................................ F-13

Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended
December 31, 1999, 2000 and 2001 ............................................... F-14

Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 2000
and 2001 ....................................................................... F-15

Notes to Consolidated Financial Statements ...................................... F-16

F-1

STRAYER EDUCATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31, SEPTEMBER 30,
2001 2002
-------------- --------------
(UNAUDITED)

ASSETS
Current Assets:
Cash and cash equivalents ........................................... $ 57,659 $ 44,695
Short-term investments -- restricted ................................ 1,046 1,053
Marketable securities available for sale, at fair value
(short-term bond fund) ............................................ -- 12,075
Income taxes receivable ............................................. -- 2,494
Tuition receivable, net of allowances for doubtful accounts ......... 19,012 27,635
Other current assets ................................................ 879 1,759
--------- ---------
Total current assets .............................................. 78,596 89,711
Student loans receivable, net of allowances for losses ............... 8,392 9,251
Property and equipment, net .......................................... 23,100 36,530
Other assets ......................................................... 400 414
--------- ---------
Total assets ...................................................... $ 110,488 $ 135,906
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable .................................................... $ 1,882 $ 3,744
Accrued expenses .................................................... 562 919
Income taxes payable ................................................ 1,247 --
Dividends payable ................................................... 1,855 1,855
Unearned tuition .................................................... 23,204 34,528
--------- ---------
Total current liabilities ......................................... 28,750 41,046
--------- ---------
Deferred lease incentives ............................................ 763 1,911
--------- ---------
Total liabilities ................................................. 29,513 42,957
--------- ---------
Mandatorily redeemable convertible Series A preferred stock,
par value $.01; 6,000,000 shares authorized; 5,845,676 and
6,003,869 shares issued and outstanding at December 31, 2001
and September 30, 2002, respectively ................................ 148,347 150,485
Stockholders' equity (deficit):
Common Stock -- Par value $.01; 20,000,000 shares
authorized; 8,352,412 shares issued and outstanding at
December 31, 2001 and September 30, 2002 .......................... 83 83
Additional paid-in capital .......................................... 1,759 1,759
Retained earnings (accumulated deficit) ............................. (69,214) (59,423)
Accumulated other comprehensive income .............................. -- 45
--------- ---------
Total stockholders' equity (deficit) .............................. (67,372) (57,536)
--------- ---------
Total liabilities and stockholders' equity (deficit) .............. $ 110,488 $ 135,906
========= =========

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

F-2

STRAYER EDUCATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------
2001 2002
-------- --------

Revenues ............................................ $ 65,692 $ 82,547
-------- --------
Costs and Expenses:
Instruction and educational support ................ 24,119 29,768
Selling and promotion .............................. 8,727 12,537
General and administration ......................... 9,381 12,757
-------- --------
42,227 55,062
-------- --------
Income from operations .............................. 23,465 27,485
Investment and other income ......................... 3,407 1,242
-------- --------
Income before income taxes .......................... 26,872 28,727
Provision for income taxes .......................... 10,479 11,203
-------- --------
Net income .......................................... 16,393 17,524
Preferred stock dividends and accretion ............. 2,952 6,076
-------- --------
Net income available to common stockholders ......... $ 13,441 $ 11,448
======== ========
Basic net income per share .......................... $ 1.13 $ 1.37
======== ========
Diluted net income per share ........................ $ 1.10 $ 1.21
======== ========

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

F-3

STRAYER EDUCATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(AMOUNTS IN THOUSANDS)

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------
2001 2002
---------- ----------

Net income ............................................. $16,393 $17,524
Other comprehensive income:
Unrealized gains on investments, net of taxes ......... -- 45
Reclassification adjustment for realized gains included
in net income ....................................... (403) --
------- -------
Comprehensive income ................................... $15,990 $17,569
======= =======

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

F-4

STRAYER EDUCATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2001 2002
------------- -------------

Cash flow from operating activities:
Net income ...................................................... $ 16,393 $ 17,524

Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of deferred lease incentives ..................... -- (165)
Depreciation and amortization ................................. 1,944 2,652
Gain on sale of marketable securities ......................... (887) --
Changes in assets and liabilities:
Short-term investments - restricted ........................... (32) (7)
Tuition receivable, net ....................................... (6,063) (8,623)
Other current assets .......................................... (548) (880)
Other assets .................................................. (91) (74)
Accounts payable .............................................. 99 1,891
Accrued expenses .............................................. 143 357
Income taxes payable/receivable ............................... 1,212 (3,741)
Unearned tuition .............................................. 9,598 11,324
Student loans originated ........................................ (5,551) (6,270)
Collections on student loans receivable ......................... 4,627 5,411
---------- ----------
Net cash provided by operating activities .................... 20,844 19,399
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment ............................. (5,074) (16,082)
Investment in short-term bond fund .............................. -- (12,000)
Maturities of and proceeds from marketable securities ........... 50,384 --
---------- ----------
Net cash provided by (used in) investing activities .......... 45,310 (28,082)
---------- ----------
Cash flows from financing activities:
Deferred lease incentives ....................................... -- 1,313
Exercise of stock options ....................................... 1,434 --
Repurchase of common stock ...................................... (179,375) --
Common dividends paid ........................................... (2,539) (1,628)
Preferred dividends paid ........................................ (663) (3,937)
Issuance of convertible Series A preferred stock ................ 150,000 --
Payments of costs of tender offer and issuance of
preferred stock ............................................... (5,788) (29)
---------- ----------
Net cash used in financing activities ........................ (36,931) (4,281)
---------- ----------
Net increase (decrease) in cash and cash equivalents ......... 29,223 (12,964)
Cash and cash equivalents - beginning of period .................. 25,190 57,659
---------- ----------
Cash and cash equivalents - end of period ........................ $ 54,413 $ 44,695
========== ==========

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

F-5

STRAYER EDUCATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
AND 2002 IS UNAUDITED

1. BASIS OF PRESENTATION

The financial statements are presented on a consolidated basis. The
accompanying financial statements include the accounts of Strayer Education,
Inc. (the Company), Strayer University, Inc. (the University) and Education
Loan Processing, Inc. (ELP), collectively referred to herein as the "Company"
or "Companies."

The results of operations for the nine months ended September 30, 2002 are
not necessarily indicative of the results to be expected for the full fiscal
year. All information as of September 30, 2002, and for the nine months ended
September 30, 2001 and 2002 is unaudited but, in the opinion of management,
contains all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the condensed consolidated financial position,
results of operations and cash flows of the Companies.

Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2001.

Certain prior period amounts have been reclassified between accounts
payable and accrued expenses on the consolidated balance sheet to conform with
September 30, 2002 presentation.

2. NATURE OF OPERATIONS

The Company, a Maryland corporation, conducts its operations through its
subsidiaries. The University is an accredited institution of higher education
that provides undergraduate and graduate degrees in various fields of study
through its twenty campuses in Maryland, Washington, D.C., Virginia and
(beginning July 1, 2002) North Carolina. ELP provides student loans for the
University's students. 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 non-current consistent with industry practice.

3. INCOME PER SHARE

Basic earnings per share is computed by dividing net income available to
common stockholders by the weighted average number of shares of common stock
outstanding. Diluted earnings per share is computed by dividing net income by
the weighted average common and potentially dilutive common equivalent shares
outstanding, determined as follows:

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
(IN THOUSANDS)
2001 2002
-------- --------

Weighted average shares outstanding used to compute basic
earnings per share ......................................... 11,851 8,352
Incremental shares issuable upon the assumed conversion of
preferred stock ............................................ 2,925 5,951
Incremental shares issuable upon the assumed exercise of stock
options .................................................... 71 182
------ -----
Shares used to compute diluted earnings per share ............ 14,847 14,485
====== ======

For additional information regarding total potential share issuance, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

F-6

Set forth below is a reconciliation of net income used to compute earnings
per share:

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------
(IN THOUSANDS)
2001 2002
---------- ----------

Net income available to common stockholders used to
compute basic earnings per share ............................ $13,441 $11,448
Plus: Impact of assumed preferred stock conversion:
Preferred stock dividends and accretion ..................... 2,952 6,076
------- -------
Net income used to compute diluted earnings per share ......... $16,393 $17,524
======= =======

4. CREDIT FACILITY

The Company maintains a credit facility from a bank in the amount of $10.0
million. Interest on any borrowings under the facility will accrue at an annual
rate not to exceed 0.75% above the London Interbank Offered Rate. There is no
outstanding balance on this credit facility as of September 30, 2002.

5. STOCKHOLDERS' EQUITY

Common Stock

A total of 20,000,000 shares of common stock, par value $0.01, have been
authorized. As of December 31, 2001 and September 30, 2002, the Company had
8,352,412 shares of common stock issued and outstanding. For the three months
ended September 30, 2002, the Company declared a quarterly cash dividend of
$0.065 per common share. The dividend was paid on October 22, 2002 to common
stockholders of record on October 8, 2002.

Preferred Stock/Mandatorily Redeemable Convertible Series A Preferred Stock

A total of 8,000,000 shares of preferred stock, par value $0.01, have been
authorized. Of these preferred shares, 6,000,000 have been designated as Series
A Preferred Stock, including shares reserved for the payment of pay-in-kind
dividends on outstanding shares of Series A Preferred Stock. The following
table reflects all Series A Preferred Stock activity from December 31, 2001 to
September 30, 2002:

MANDATORILY
REDEEMABLE
CONVERTIBLE SERIES
A PREFERRED STOCK
-------------------
$ AMOUNT
(IN THOUSANDS)

Balance, December 31, 2001 ............... $148,347
Dividends -- paid-in-kind shares ......... 4,184
Accretion of carrying value .............. (2,046)
--------
Balance, September 30, 2002 .............. $150,485
========

On January 1, 2002 the Company recorded 51,819 shares of Series A
Preferred Stock that had been accrued as pay-in-kind dividends as of December
31, 2001. On April 1, 2002 the Company recorded 52,726 shares of Series A
Preferred Stock that had been accrued as pay-in-kind dividends as of March 31,
2002. On July 1, 2002 the Company recorded 53,648 shares of Series A Preferred
Stock that had been accrued as pay-in-kind dividends as of June 30, 2002. The
number of shares of Series A Preferred Stock outstanding and/or recorded as of
September 30, 2002 was 6,003,869. On October 1, 2002, the Company recorded
54,587 shares of Series A Preferred Stock that had been accrued as pay-in-kind
dividends as of September 30, 2002.

The Series A Preferred Stock dividends and accretion are recorded based on
an effective yield of 5.43% applied to the carrying value of the Series A
Preferred Stock. This stock is convertible into common shares at a price of
$26.00 per share on a one-for-one basis. To the extent the Company's

F-7

common stock trades above $52.00 per share for 20 consecutive trading days at
any time after May 15, 2004, the Company may cause conversion of the Series A
Preferred Stock. For a more detailed description of the terms of the Series A
Preferred Stock, see the description thereof contained in the Note 6 of the
Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Stock Options

In July 1996, the Company's stockholders approved 1,500,000 shares of
common stock for grants under the Company's 1996 Stock Option Plan. This Plan
was amended by the stockholders at the May 2001 Annual Stockholders' Meeting to
increase the shares authorized for issuance thereunder by 1,000,000 (as
amended, the "Plan") to 2,500,000. The Plan provides for the grant of options
intended to qualify as incentive stock options, and also provides for the grant
of non-qualifying options to employees and directors of the Company. Options
may be granted to eligible employees or directors of the Company at the
discretion of the Board of Directors, at option prices based at or above the
fair market value of the shares at the date of grant. Vesting provisions are at
the discretion of the Board of Directors. The maximum term of the options was 5
years before the amendment and 7 years after the amendment. The table below
sets forth the stock option activity for the nine months ended September 30,
2002:

WEIGHTED-AVERAGE
NUMBER OF SHARES EXERCISE PRICE
------------------ -----------------

Balance, December 31, 2001 .......... 930,000 $ 36.43
Grants .............................. 50,000 51.83
Exercises ........................... -- --
Forfeitures ......................... (10,000) (49.33)
------- --------
Balance, September 30, 2002 ......... 970,000 $ 37.09
======= ========

In the second quarter of 2002, 50,000 stock options were in total granted
to three new employees and one new member of the Board of Directors. These
options vest over 3 to 4 years with exercise prices ranging from $49.33 to
$61.81. All options granted in 2002 expire in 2009. In the third quarter of
2002, no stock options were granted and 10,000 stock options were forfeited. Of
the 970,000 total stock options that have been issued and are outstanding,
293,333 are exercisable as of September 30, 2002. A total of 579,405 shares
remain authorized but unissued under the Plan.

The Company accounts for the fair value of its stock options granted to
employees and directors 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 net income and net
income per share for the nine months ended September 30, 2002 would have been
decreased as indicated in the pro forma section below (in thousands):

F-8

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------
2001 2002
------------ ------------

As Reported:
Net income available to all shareholders ............ $ 16,393 $ 17,524
Net income available to common shareholders ......... $ 13,441 $ 11,448
Net income per common share-Basic ................... $ 1.13 $ 1.37
Net income per common share-Diluted ................. $ 1.10 $ 1.21
Proforma:
Net income available to all shareholders ............ $ 15,377 $ 15,682
Net income available to common shareholders ......... $ 12,425 $ 9,606
Net income per common share-Basic ................... $ 0.91 $ 1.15
Net income per common share-Diluted ................. $ 1.03 $ 1.08

For the purposes of the above presentation, the fair value of each option
granted in 2001 was estimated on the date of grant using the Black-Scholes
option-pricing model using the following assumptions: dividend yield of .7%;
expected volatility of 47%; risk-free interest rate of 4.75% and an expected
term of 5.3 years. The weighted average fair value for the 2001 grants was
$16.68. The fair value of each option granted in 2002 was estimated using the
Black-Scholes option-pricing model using the following assumptions: dividend
yield of .7%; expected volatility of 43%; risk-free interest rate of 4.81%; and
an expected term of 5.9 years. The weighted average fair value for the 2002
grants was $23.65.

6. INVESTMENTS IN MARKETABLE SECURITIES

In the second quarter of 2002, as part of its cash management activities,
the Company began investing in a diversified no load, short-term, investment
grade corporate bond fund. These marketable securities are considered
"available for sale," and as such, are stated at fair value. The net unrealized
gains and losses are reported as a component of accumulated comprehensive
income (loss) in stockholders' equity (deficit) net of tax.

7. RECENT ACCOUNTING PRONOUNCEMENTS

In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("FAS 144"). FAS 144 supersedes FASB Statement No. 121 "Accounting for
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of".
FAS 144 addresses the financial accounting and reporting for long-lived assets
and their impairment and disposal. The statement is effective for fiscal years
beginning after December 15, 2001. The Company has long-lived assets in the
form of buildings that it owns and uses to conduct classes for its students.
FAS 144 was adopted on January 1, 2002 with no material effect on the
consolidated financial statements.

8. LEASE AGREEMENTS

During the first quarter of 2002, the Company executed lease agreements
for three North Carolina campuses. The table below sets forth additional
information regarding these leases:

LEASE
COMMENCEMENT AVERAGE
CAMPUS SQUARE FEET DATE TERM ANNUAL PAYMENT
------ ----------- ---- ---- --------------

South Charlotte, NC 12,500 5/15/02 60 mos. $143,000
Raleigh-Durham, NC 12,900 5/20/02 60 mos. $166,000
North Charlotte, NC 13,600 6/15/02 100 mos. $194,000

9. DEFERRED LEASE INCENTIVES

In conjunction with the opening of the Company's new corporate
headquarters in Arlington, VA in 2002, the Company was reimbursed by the lessor
for improvements made to the leased property in

F-9

the amount of $250,000 in the three months ended June 30, 2002. The Company was
reimbursed by the lessors for improvements made to leased property in the
amount of $1,063,000 in the three months ended September 30, 2002 primarily in
conjunction with the opening of the Company's three North Carolina campuses.
The Company also recorded $763,000 in lease incentives for two new campuses in
2001. In accordance with Financial Accounting Standards Board Technical
Bulletin No. 88-1, these costs were capitalized as leasehold improvements and
the reimbursements were recorded as deferred lease incentives. The leasehold
improvements and the deferred lease incentives are being amortized on a
straight-line basis over the corresponding lease terms, which range from 5 to
10 years.

F-10

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
Strayer Education, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, comprehensive income, stockholders' equity
(deficit) and cash flows present fairly, in all material respects, the
financial position of Strayer Education, Inc. and its subsidiaries (the
"Company") as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted
in the United States of America. 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 of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

/s/ PricewaterhouseCoopers LLP

Washington, D.C.
February 1, 2002

F-11

STRAYER EDUCATION, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31,
-------------------------
2000 2001
---------- ------------

ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 25,190 $ 57,659
Marketable securities available for sale, at fair value ........... 5,918 --
Short-term investments--restricted ................................ 1,008 1,046
Tuition receivable, net of allowances for doubtful accounts of $489
and $457 in 2000 and 2001, respectively.......................... 15,264 19,012
Other current assets .............................................. 757 879
-------- --------
Total current assets ......................................... 48,137 78,596
Student loans receivable, net of allowances for losses ............. 7,288 8,392
Property and equipment, net ........................................ 19,469 23,100
Marketable securities available for sale, at fair value ............ 43,982 --
Other assets ....................................................... 263 400
-------- --------
Total assets ................................................. $119,139 $110,488
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable .................................................. $ 769 $ 792
Accrued expenses .................................................. 1,325 1,652
Income taxes payable .............................................. 323 1,247
Dividends payable ................................................. 995 1,855
Unearned tuition .................................................. 17,983 23,204
-------- --------
Total current liabilities .................................... 21,395 28,750
Long-term liabilities .............................................. -- 763
-------- --------
Total liabilities ............................................ 21,395 29,513
-------- --------
Commitments and contingencies
Mandatorily redeemable convertible preferred stock, par value $.01;
liquidation preference $151,988 (excluding accrued dividends);
6,000,000 shares authorized; 5,845,676 Series A shares issued and
outstanding in 2001 ............................................... -- 148,347
Stockholders' equity (deficit):
Common stock, par value $.01; 20,000,000 shares authorized;
15,303,166 and 8,352,412 shares issued and outstanding in 2000
and 2001, respectively .......................................... 153 83
Additional paid-in capital ........................................ 33,119 1,759
Retained earnings (accumulated deficit) ........................... 64,069 (69,214)
Accumulated other comprehensive income ............................ 403 --
-------- --------
Total stockholders' equity (deficit) ......................... 97,744 (67,372)
-------- --------
Total liabilities and stockholders' equity (deficit) ......... $119,139 $110,488
======== ========

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

F-12

STRAYER EDUCATION, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

FOR THE YEAR ENDED
DECEMBER 31,
------------------------------------------
1999 2000 2001
------------ ------------ ------------

Revenues ............................................. $ 69,776 $ 78,214 $ 92,876
-------- -------- --------
Costs and expenses:
Instruction and educational support ................. 25,082 28,187 33,699
Selling and promotion ............................... 7,765 8,480 12,576
General and administration .......................... 9,405 10,620 13,094
-------- -------- --------
42,252 47,287 59,369
-------- -------- --------
Income from operations .............................. 27,524 30,927 33,507
Investment and other income .......................... 4,302 4,756 3,791
-------- -------- --------
Income before income taxes .......................... 31,826 35,683 37,298
Provision for income taxes ........................... 12,500 13,974 14,489
-------- -------- --------
Net income .......................................... 19,326 21,709 22,809
Preferred stock dividends and accretion .............. -- -- 5,010
-------- -------- --------
Net income available to common stockholders ......... $ 19,326 $ 21,709 $ 17,799
======== ======== ========
Net income per share:
Basic ............................................... $ 1.25 $ 1.42 $ 1.62
Diluted ............................................. $ 1.23 $ 1.41 $ 1.55
Weighted average shares outstanding
Basic ............................................... 15,506 15,324 10,970
Diluted ............................................. 15,711 15,451 14,737

STRAYER EDUCATION, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN THOUSANDS)

FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1999 2000 2001
---------- ---------- ----------

Net income ...................................................... $19,326 $21,709 $22,809
Other comprehensive income (loss):
Unrealized gains (losses) on investments, net of taxes ......... (204) (136) --
Reclassification adjustment for realized gains included in
net income, net of taxes ..................................... -- -- (403)
------- ------- -------
Comprehensive income ............................................ $19,122 $21,573 $22,406
======= ======= =======

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

F-13

STRAYER EDUCATION, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT SHARE DATA)

RETAINED ACCUMULATED
COMMON STOCK ADDITIONAL EARNINGS OTHER
-------------------------- PAID-IN (ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT) INCOME TOTAL
-------------- ----------- ------------ -------------- -------------- ------------

Balance, December 31, 1998 ....... 15,774,477 $158 $ 50,470 $ 30,274 $ 743 $ 81,645
Exercise of stock options ....... 133,203 1 903 -- -- 904
Repurchase of common
stock ......................... (630,429) (6) (17,723) -- -- (17,729)
Dividends ($0.24 per share)...... -- -- -- (3,406) -- (3,406)
Tax benefit from exercise of
stock options ................. -- -- 525 -- -- 525
Net unrealized losses on
marketable securities ......... -- -- -- -- (204) (204)
Net income ...................... -- -- -- 19,326 -- 19,326
---------- ---- --------- ---------- ------ ----------
Balance, December 31, 1999 ....... 15,277,251 153 34,175 46,194 539 81,061
Exercise of stock options ....... 88,615 1 590 -- -- 591
Repurchase of common
stock ......................... (62,700) (1) (2,028) -- -- (2,029)
Dividends ($0.25 per share)...... -- -- -- (3,834) -- (3,834)
Tax benefit from exercise of
stock options ................. -- -- 382 -- -- 382
Net unrealized losses on
marketable securities ......... -- -- -- -- (136) (136)
Net income ...................... -- -- -- 21,709 -- 21,709
---------- ---- --------- ---------- ------ ----------
Balance, December 31, 2000 ....... 15,303,166 153 33,119 64,069 403 97,744
Exercise of stock options ....... 224,246 2 1,493 -- -- 1,495
Repurchase of common
stock including transaction
costs of $3,671................ (7,175,000) (72) (34,528) (148,446) -- (183,046)
Preferred stock dividends
and accretion ................. -- -- -- (5,010) -- (5,010)
Common stock dividends
($0.26 annually per share)..... -- -- -- (2,636) -- (2,636)
Tax benefit from exercise of
stock options ................. -- -- 1,675 -- -- 1,675
Reclassification adjustment
for realized gains included
in net income ................. -- -- -- -- (403) (403)
Net income ...................... -- -- -- 22,809 -- 22,809
---------- ---- --------- ---------- ------ ----------
Balance, December 31, 2001 ....... 8,352,412 $ 83 $ 1,759 $ (69,214) $ -- $ (67,372)
========== ==== ========= ========== ====== ==========

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

F-14

STRAYER EDUCATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 2000 2001
------------ ------------ -------------

Cash flows from operating activities:
Net income ..................................................... $ 19,326 $ 21,709 $ 22,809
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................ 1,894 2,063 2,643
Provision for student loan losses ............................ 216 172 196
Deferred income taxes ........................................ (248) (147) 144
Gain on sale of marketable securities ........................ -- -- (887)
Changes in assets and liabilities:
Short-term investments--restricted ........................... (37) (49) (38)
Tuition receivable, net ...................................... (3,185) (267) (3,748)
Income taxes ................................................. 599 906 2,600
Other current assets ......................................... (114) 42 (145)
Other assets ................................................. (97) 56 --
Accounts payable ............................................. 17 279 23
Accrued expenses ............................................. (520) 902 327
Unearned tuition ............................................. 2,098 2,612 5,221
Student loans originated or acquired ........................... (5,124) (5,499) (7,313)
Collections on student loans receivable ........................ 3,996 4,475 6,013
--------- --------- ----------
Net cash provided by operating activities ................... 18,821 27,254 27,845
--------- --------- ----------
Cash flows from investing activities:
Purchases of property and equipment ............................ (4,851) (4,388) (6,274)
Purchases of marketable securities ............................. (9,298) (14,157) --
Maturities of marketable securities ............................ 9,030 9,462 50,126
--------- --------- ----------
Net cash provided by (used in) investing activities ......... (5,119) (9,083) 43,852
--------- --------- ----------
Cash flows from financing activities:
Common dividends paid .......................................... (3,278) (3,756) (3,088)
Preferred dividends paid ....................................... -- -- (1,976)
Lease incentives ............................................... -- -- 763
Proceeds from exercise of stock options ........................ 904 591 1,495
Repurchase of common stock ..................................... (17,729) (2,029) (183,046)
Issuance of preferred stock, net ............................... -- -- 146,624
--------- --------- ----------
Net cash used in financing activities ....................... (20,103) (5,194) (39,228)
Net increase (decrease) in cash and cash
requirements .............................................. (6,401) 12,977 32,469
Cash and cash equivalents--beginning of year .................... 18,614 12,213 25,190
--------- --------- ----------
Cash and cash equivalents--end of year .......................... $ 12,213 $ 25,190 $ 57,659
========= ========= ==========

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

F-15

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF OPERATIONS

Strayer Education, Inc. (the "Company"), a Maryland corporation, conducts
its operations through its subsidiaries, Strayer University, Inc. (the
"University") and Education Loan Processing, Inc. ("ELP"). The University is an
accredited institution of higher education that provides undergraduate and
graduate degrees in various fields of study through its seventeen campuses in
the District of Columbia, Maryland and Virginia. The Company has also been
approved to offer its programs in North Carolina and plans to open three
campuses in that state in 2002.

In May 2001, the Company underwent a $150 million recapitalization and
change of control transaction in which it issued 5,769,231 shares of its Series
A Convertible Mandatorily Redeemable Preferred Stock of the Company to an
investor group consisting of New Mountain Partners L.P. and DB Capital
Investors, L.P. (collectively, the "Investors"). The Series A Convertible
Mandatorily Redeemable Preferred Stock has an effective dividend yield of 5.43%
and is convertible into common stock at a price of $26.00 per share, subject to
adjustment under certain circumstances. (See Note 6 below.) The Company used
the $150 million, together with approximately $36.4 million of its cash and
marketable securities, to repurchase 7,175,000 shares of outstanding common
stock of the Company from the Company's then CEO and majority stockholder at
$25.00 per share.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its subsidiaries, the University, ELP, and Professional Education, Inc.
(which is currently an inactive subsidiary). All inter-company accounts and
transactions have been eliminated in the consolidated financial statements.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of operating cash and cash invested in
money market mutual funds and bank CDs. The Company places its cash and
temporary cash investments with high quality credit institutions. The Company
considers all highly liquid instruments purchased with a maturity of three
months or less at the date of purchase to be cash equivalents.

INVESTMENTS

The Company's investments in marketable securities are considered
"available-for-sale" and, as such are stated at fair value. The net unrealized
gains and losses are reported as a component of accumulated comprehensive
income in stockholders' equity (deficit). Realized gains or losses from the
sale of marketable securities are based on the specific identification method.

TUITION REVENUES

Tuition income is deferred at the time of registration and is recognized
as income, net of any refunds or withdrawals, 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

F-16

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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.

ELP's student loans receivable have been classified as non-current assets,
consistent with industry practice. All of ELP's other assets and liabilities
have been classified as current assets and current liabilities for
consolidation purposes.

CONCENTRATION OF CREDIT RISK

The Company places its cash and temporary cash investments in money market
mutual funds and bank CD's with high credit quality institutions. At times cash
and cash equivalent balances may be in excess of the FDIC insurance limit. The
Company has not experienced any losses on its cash and cash equivalents.

Tuition receivables are not collateralized; however, credit risk is
minimized as a result of the diverse nature of the University's student base in
the District of Columbia, Maryland, and Virginia. The University establishes an
allowance for doubtful tuition accounts based upon historical trends and other
information.

Student loans are receivable from the University's students. The Company
performs credit evaluations and requires cosigners in some instances to
minimize credit risk.

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 and amortization amounted
to $1,894,000, $2,063,000 and $2,643,000 for the years ended December 31, 1999,
2000, and 2001, respectively.

INCOME TAXES

The Company provides for deferred income taxes based on temporary
differences between financial statement and income tax bases of assets and
liabilities using enacted tax rates in effect in the year in which the
differences are expected to reverse.

NET INCOME PER SHARE

Basic earnings per share is computed by dividing net income available to
common stockholders by the weighted average number of shares of common stock
outstanding during the periods. Diluted earnings per share is computed by
dividing net income by the weighted average common and potentially dilutive
common equivalent shares outstanding, determined as follows (in thousands):

1999 2000 2001
-------- -------- ---------

Weighted average shares outstanding used to compute basic
earnings per share. ......................................... 15,506 15,324 10,970
Incremental shares issuable upon the assumed conversion of
preferred stock ............................................. -- -- 3,661
Incremental shares issuable upon the assumed exercise of stock
options ..................................................... 205 127 106
------ ------ ------
Shares used to compute diluted earnings per share ............ 15,711 15,451 14,737
====== ====== ======

Incremental shares issuable upon the assumed exercise of outstanding stock
options is computed using the average market price during the related periods.

F-17

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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. The most significant
management estimates included allowances for uncollectible accounts and student
loans receivable, accrued expenses, and the provision for income taxes. Actual
results could differ from those estimates.

COMPREHENSIVE INCOME

Comprehensive income consists of net income and unrealized gains (losses)
on investments in marketable securities, net of income taxes.

RECLASSIFICATION

Certain amounts for the year ended December 31, 1999 have been
reclassified to operating activities on the consolidated statements of cash
flows to conform with the December 31, 2000 and 2001 presentations.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("FAS 141"). FAS 141 supersedes Accounting
Principles Board Opinion No. 16 Business Combinations. FAS 141 requires the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001, establishes specific criteria for the recognition of
intangible assets separately from goodwill, and requires unallocated negative
goodwill to be written off immediately as an extraordinary gain (instead of
being deferred and amortized).

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 142, "Goodwill and Other Intangible Assets" ("FAS
142"). FAS 142 supersedes Accounting Principles Board Opinion No. 17,
"Intangible Assets." FAS 142 addresses the accounting for goodwill and
intangible assets subsequent to their acquisition. Goodwill and indefinite
lived intangible assets can no longer be amortized, must be tested for
impairment at least annually at the reporting unit level, and the amortization
period of intangible assets with finite lives will no longer be limited to
forty years. FAS 142 is effective for fiscal years beginning after December 15,
2001.

The Company has not made any acquisitions after June 30, 2001 and the
Company does not have goodwill or intangible assets. The adoption of FAS 141
and FAS 142 will not have any effect on the consolidated financial statements.

2. 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 cash or cash
equivalent account until such amounts are required to be remitted to students.
These funds are invested in short-term U.S. Treasury Notes.

MARKETABLE SECURITIES

The Company liquidated all of its investments in marketable securities and
holds no investments as of December 31, 2001. The cost and fair value for each
class of investments as of December 31, 2000 are as follows (in thousands):

F-18

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2000
-----------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ------------ ------------ ----------

Certificates of deposit and money market
funds ................................. $20,580 $ -- $ -- $20,580
Fixed income investments ............... 20,591 183 124 20,650
Equity securities. ..................... 8,068 651 49 8,670
------- ---- ---- -------
Total ................................. $49,239 $834 $173 $49,900
======= ==== ==== =======

3. PROPERTY AND EQUIPMENT

The composition of property and equipment as of December 31, 2000 and 2001
is as follows (in thousands):

ESTIMATED USEFUL
2000 2001 LIFE (YEARS)
----------- ----------- -----------------

Land .............................................. $ 2,772 $ 2,772 --
Buildings ......................................... 5,414 9,988 40
Furniture and equipment ........................... 13,921 14,229 5-7
Leasehold improvements ............................ 5,702 5,479 3-10
Vehicles .......................................... 22 22 5
Construction in progress .......................... 1,436 14 --
-------- --------
29,267 32,504
Accumulated depreciation and amortization ......... (9,798) (9,404)
-------- --------
$ 19,469 $ 23,100
======== ========

During 2001, fully depreciated assets of approximately $3 million were
written off. In addition, $763,000 in leasehold improvements, paid by lessors
as lease incentives, were capitalized during 2001.

4. STUDENT LOANS RECEIVABLE

The loans receivable under the Strayer Education Loan Program as of
December 31, 2000 and 2001 are as follows (in thousands):

2000 2001
--------- ---------

Student loans receivable outstanding, including accrued interest .......... $7,753 $8,928
Allowance for loan losses. ................................................ (465) (536)
------ ------
Student loans receivable, net ............................................. $7,288 $8,392
====== ======

The interest rate on these student loans is generally 7.5%. The Company
believes the carrying value of the student loans approximates their fair value.
The loans require a minimum monthly payment based on a percentage of the
outstanding monthly balance, plus interest, while the student is in attendance.
Upon the student's graduation or withdrawal, the loans become due in equal
monthly installments based on a fixed payment plan.

F-19

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. STOCK OPTION PLAN

In July 1996, the Company set aside 1,500,000 shares of common stock for
grants under the Company's 1996 Stock Option Plan, which was amended at the May
2001 Annual Shareholders' Meeting to increase the shares authorized for
issuance thereunder by 1,000,000 (as amended, "the Plan"). The Plan provides
for the grant of options intended to qualify as incentive stock options, and
also provides for the grant of non-qualifying options to directors and
employees and directors of the Company. Options may be granted to eligible
employees of the Company 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. The maximum
term of the options was 5 years before the amendment and 7 years after the
amendment. Stock option activity for the years ended December 31, 1999, 2000
and 2001 are as follows:

NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------------- -----------------

Balance, December 31, 1998 ......... 443,762 $ 6.67
Grants ............................ 2,759 6.67
Exercises ......................... (133,203) 6.67
Forfeitures ....................... -- --
-------- -------
Balance, December 31, 1999 ......... 313,318 6.67
Grants ............................ -- --
Exercises ......................... (88,615) 6.67
Forfeitures ....................... -- --
-------- -------
Balance, December 31, 2000 ......... 224,703 6.67
Grants ............................ 930,000 36.43
Exercises ......................... (224,246) 6.67
Forfeitures ....................... (457) 6.67
-------- -------
Balance, December 31, 2001 ......... 930,000 $ 36.43
======== =======

The number of shares exercisable as of December 31, 1999, 2000 and 2001
are as follows:

NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
----------- -----------------

Exercisable, December 31, 1999 ......... 313,318 $ 6.67
Exercisable, December 31, 2000 ......... 224,703 $ 6.67
Exercisable, December 31, 2001 ......... -- $ --

During 2001, new options were granted to thirteen key executives and
directors in conjunction with the recapitalization that took place in May 2001
and the retention of a new senior management team. The weighted average
exercise price per share of all options as of December 31, 2001 was $36.43. The
options vest over 3 to 4 years with exercise prices ranging from $33.69 to
$47.44. All options granted in 2001 expire in 2008 and have a weighted-average
contractual life of 6.3 years as of December 31, 2001.

F-20

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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 net income and net income per share for the
years ended December 31, 1999, 2000, and 2001 would have been decreased as
indicated in the pro forma section below (in thousands):

1999 2000 2001
------------ ------------ ------------

As reported:
Net income .......................................... $ 19,326 $ 21,709 $ 22,809
Net income available to common stockholders ......... $ 19,326 $ 21,709 $ 17,799
Net income per common share -- Basic ................ $ 1.25 $ 1.42 $ 1.62
Net income per common share -- Diluted. ............. $ 1.23 $ 1.41 $ 1.55
Pro forma:
Net income .......................................... $ 19,283 $ 21,530 $ 21,269
Net income available to common stockholders ......... $ 19,283 $ 21,530 $ 16,259
Net income per common share -- Basic ................ $ 1.24 $ 1.40 $ 1.48
Net income per common share -- Diluted. ............. $ 1.23 $ 1.39 $ 1.44

The fair value of each option granted in 1999 was estimated on the date of
grant using the Black-Scholes option-pricing model using the following
assumptions: dividend yield of 1.0%; expected volatility of 47%; risk-free
interest rate of 5.25%; expected term of 2.1 years. The weighted average fair
value at date of grant was $25.55 per share. There were no new options granted
in 2000. The fair value of each option granted in 2001 was estimated on the
date of grant using the Black-Scholes option-pricing model using the following
assumptions: dividend yield of .7%; expected volatility of 47%; risk-free
interest rate of 4.75% and an expected term of 5.31 years. The weighted average
fair value at the date of grant was $16.68.

6. PREFERRED STOCK/SERIES A MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

In May 2001, the Company underwent a $150 million recapitalization and
change of control transaction in which it issued 5,769,231 shares of its Series
A Convertible Mandatorily Redeemable Preferred Stock (the "Series A Preferred
Stock") of the Company to an investor group consisting of New Mountain Partners
L.P. and DB Capital Investors, L.P. (collectively, the "Investors"). The Series
A Preferred Stock has an effective dividend yield of 5.43% and is convertible
into common stock at a price of $26.00 per share, subject to adjustment under
certain circumstances. The Company used the $150 million, together with
approximately $36.4 million of its cash and marketable securities, to
repurchase 7,175,000 shares of outstanding common stock of the Company from the
Company's then CEO and majority stockholder at $25.00 per share. The Series A
Preferred Stock has the following material terms:

Authorized

A total of 8,000,000 shares of preferred stock, par value $.01, have been
authorized. Of these preferred shares, 6,000,000 have been designated as Series
A Preferred Stock, including shares to be reserved for the payment of dividends
on the outstanding shares of Series A Preferred Stock. The original issuance of
Series A Preferred Stock and all quarterly preferred stock dividends thereon
through December 31, 2001 are reflected in the following table:

F-21

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

SERIES A MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK
------------------------------
AMOUNT
SHARES (IN THOUSANDS)
------------ ---------------

Balance, December 31, 2000 ........... -- --
Issuance of shares ................... 5,769,231 $150,000
Issuance costs ....................... (3,375)
Dividend-paid in kind shares ......... 76,445 1,988
Accretion of carrying value .......... (266)
--------- --------
Balance, December 31, 2001 ........... 5,845,676 $148,347
========= ========

Series A Preferred Stock dividends and accretion are recorded based on an
effective yield of 5.43% applied to the carrying value of the Series A
Preferred Stock.

Ranking

The shares of Series A Preferred Stock rank, as to dividends and rights
upon liquidation, dissolution, or winding up, senior to the common Stock and on
a parity with each other.

Dividends

The holders of shares of Series A Preferred Stock are entitled to receive
dividends prior to any amounts being paid on the common stock when, as, and if
declared by the Board of Directors out of funds legally available therefore.
Dividends on the Series A Preferred Stock are payable as follows:

o From the original issuance date of the Series A Preferred Stock until
May 15, 2006, dividends accrue at an annual rate of 7.0% of the sum of
the liquidation amount, which is $26.00 per share, as adjusted, plus
any accumulated and unpaid dividends, with 3.5% of the original
investment amount payable in cash when the dividend is declared and the
rest issued in additional shares and compounding quarterly until the
Series A Preferred Stock either converts, is redeemed, or a liquidation
event occurs.

o Beginning on May 16, 2006, dividends accrue at an annual rate of 3.0%
of the sum of the Liquidation Amount plus any accumulated and unpaid
dividends, all of which are payable in cash when the dividend is
declared.

Conversion at the Option of the Holder

The shares of Series A Preferred Stock are initially convertible, in whole
or in part, at the option of the holder thereof, into shares of common stock at
a conversion rate of one share of common stock for each share of Series A
Preferred Stock, subject to adjustment for certain events, including stock
splits, stock dividends, and dilutive issuances of capital stock.

Liquidation Rights

Upon any liquidation, dissolution, or winding up of the Company, the
holders of Series A Preferred Stock are entitled to a liquidation preference,
prior to any amounts being paid on the

F-22

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

common stock, in an amount equal to the greater of (1) the sum of $26.00 per
share of Series A Preferred Stock plus compounded, accumulated but unpaid
dividends (in each case, as adjusted for stock dividends, stock combinations,
or similar events) and (2) the product of (a) the price of the common stock
calculated as the average of the daily closing prices for 5 consecutive trading
days selected by the Board of Directors out of the 20 trading days preceding
the date of the liquidation, dissolution, or winding up and (b) the number of
shares of common stock to which the holders of Series A Preferred Stock would
have been entitled if they had converted their shares.

Change of Control

Upon any change of control of the Company, the holders of Series A
Preferred Stock are entitled in each holder's sole discretion to elect to
receive the liquidation amount per share plus accumulated and unpaid dividends.
If no election is made, the holders retain their Series A Preferred Stock.

Voting Rights

Each holder of Series A Preferred Stock is entitled to the number of votes
equal to the number of whole shares of common stock into which all of the
holder's Series A Preferred Stock is convertible, with respect to all matters
submitted for Stockholder approval. Except as provided by law or by the express
terms of the Series A Preferred Stock, holders vote together with holders of
the common stock as a single class. For so long as there are any shares of
Series A Preferred Stock outstanding, the approval of the holders of at least a
majority of the Series A Preferred Stock shall be required to take certain
actions including:

o Any reclassification of the Series A Preferred Stock or any amendment,
alteration, or repeal of any provision of our charter or bylaws that
adversely affects the holders of the Series A Preferred Stock;

o The authorization, creation, or issuance of additional equity
securities ranking senior to or on a par with the Series A Preferred
Stock on liquidation or distributions or any security convertible into,
or which provides a right to acquire, a senior or pari passu security;

o Any issuance of shares of common stock at a per share price less than
$26.00, subject to certain adjustments, including securities
convertible into common stock at a per share conversion price less than
$26.00; and

o The declaration, payment, or making of any dividend or distribution on
the common stock other than our regular quarterly dividend of $0.065
per share of common stock.

Redemption at the Company's Option

The Series A Preferred Stock may not be redeemed at the option of the
Company prior to May 15, 2004. From and after the third year until the fifth
year that the Series A Preferred Stock is outstanding, so long as the common
stock is listed on the New York Stock Exchange or the NASDAQ National Market,
the Company may redeem it, in whole or in part, within 45 days of any period in
which the closing price of the common stock for at least 20 consecutive trading
days equals or exceeds 200% of the conversion price, which is initially $26.00
per share; provided that the 20 day period may not begin before May 15, 2004.
After May 15, 2006, the Company may redeem the Series A Preferred Stock in
whole or in part at its discretion. In either case, the redemption price of
each share of Series A Preferred Stock is equal to the liquidation amount, plus
accumulated and unpaid dividends. The decision of whether to redeem is to be
made in the discretion of the directors not elected by the Investors.

F-23

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Redemption at the Option of the Holder

The holders of the Series A Preferred Stock may request that it be
redeemed only:

o After the tenth anniversary of its issuance (May 15, 2011);

o Upon a change of control of the Company; or

o In the event the Company sells all or substantially all of its assets.

Upon the occurrence of any of these events, a holder of Series A Preferred
Stock may require the Company to redeem all or a part of that holder's shares
of Series A Preferred Stock, at a purchase price equal to the liquidation
amount, as adjusted, plus accumulated and unpaid dividends.

REGISTRATION RIGHTS

Demand Registration

The Company has agreed that if it is not eligible to use the short-form
registration statement, Form S-3, it will register the resale of the securities
held by the Investors upon their request, as follows:

o The Company will not register the resale of securities more than two
times;

o The Company will not register the resale of securities more than once
during any six month period; and

o The aggregate offering price of the resale of securities must be at
least $10 million.

However, if the Company is eligible to use the short-form registration
statement, Form S-3, the Investors shall also have the right to request
registration on that form two times during any one year for a "shelf"
registration permitted by Rule 415 under the Securities Act. A majority of the
holders of the securities originally issued to the Investors is required to
request the "shelf" registration.

If the Company's Board of Directors determines that a requested
registration statement would result in a disclosure of information that would
materially and adversely affect any proposed or pending material transaction,
the Company may delay the registration. No postponement may exceed 90 days and
all postponements shall not exceed 120 days in the aggregate in any 12-month
period.

The Company may register securities for its own account or for the account
of other stockholders in a registration requested by the Investors, so long as
the inclusion of additional securities does not reduce the amount of securities
that may be sold by the Investors.

Securities registrable under the Registration Rights Agreement include the
Series A Preferred Stock, the common stock and other securities, if any,
issuable on conversion of the Series A Preferred Stock, the common stock, if
any, purchased by the Investors in accordance with the options granted them by
our former CEO and majority stockholder, and any securities issued to the
Investors in accordance with their preemptive rights.

Piggy-back Registration

Piggy-back registration means the rights of the holders of the
registration rights to include their shares in a registration filed by the
Company for its own account or in a registration the Company has filed upon the
request of other stockholders. The Company has granted the Investors unlimited
piggy-back registration rights.

F-24

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Expenses

The Company will bear all the expenses of the registration, other than any
fees and disbursements of the underwriters that are customarily borne by
selling Stockholders and all underwriting discounts, commissions, and transfer
taxes relating to the securities sold by the Investors.

Indemnification

The Company has agreed to indemnify the Investors against any losses,
including fees and expenses, which may arise out of an untrue statement or an
omission of a material fact in any registration statement, other than untrue
statements that were provided in writing by the Investors or omissions of
material facts from statements provided in writing by the Investors for
inclusion in the registration statement. Each Investor, severally and not
jointly, has agreed to indemnify the Company and any underwriters participating
in the registration statement against any losses that may arise out of any
untrue statement that was provided in writing by that Investor or omissions of
material facts from statements provided in writing by that Investor for
inclusion in the registration statement. The amounts owed by the Investors
under this indemnification obligation shall not exceed the proceeds the
Investors received from the sale of securities under the registration
statement.

Transferability of Registration Rights

The Investors may freely transfer the registration rights to any of their
affiliates. The Investors may also transfer the registration rights to any
other person to whom the Investors or their affiliates transfer shares of
Series A Preferred Stock or the common stock into which the Series A Preferred
Stock converts having any aggregate purchase price or liquidation amount of at
least $10 million.

OTHER TERMS OF SERIES A PREFERRED STOCK

Corporate Governance

Pursuant to the terms of the Series A Preferred Stock, the holders of the
Series A Preferred Stock are initially entitled to elect one-half of the
Company's Board of Directors. The percentage of the Company's Board of
Directors that the holders of the Series A Preferred Stock may elect decreases
as the number of shares of Series A Preferred Stock outstanding decreases in
the following manner:

% OF SERIES A
PREFERRED STOCK
ORIGINALLY ISSUED STILL % OR NUMBER OF
OUTSTANDING DIRECTORS
----------------------- ------------------

90% and Above 50%
50% to 89.9% 40%
25% to 49.9% 25%
10% to 24.9% At Least 1 member
0% to 9.9% none

In addition, in the event that the Company fails to pay the redemption
price for the Series A Preferred Stock in connection with a proper redemption
request in an amount at least equal to $30 million, the holders of the Series A
Preferred Stock will be able to elect a majority of the Company's Board of
Directors until the redemption price is paid.

Any significant changes in the Company's ownership and control could
require U.S. Department of Education or other regulatory agency approval.

F-25

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

o Any authorization or issuance, reclassification, repurchase,
redemption, or other acquisition of any of our equity securities or any
other securities exercisable for or convertible into any equity
securities;

o Any issuance or incurrence of indebtedness that would result in the
Company having in excess of an aggregate of $25 million of indebtedness
outstanding;

o Any liquidation, dissolution, winding up, or reorganization of the
Company;

o Any transaction or series of related transactions involving a change of
control or the sale of all or substantially all of the Company's equity
or assets, or any acquisition, disposition, or other business
combination involving consideration in excess of $20 million;

o Any amendment to the Company's charter or bylaws; and

o The removal or replacement of, or the establishment of the level or
form of compensation payable to, the Company's chief executive officer,
chief operating officer or chief financial officer.

Preemptive Rights

The holders of the Series A Preferred Stock have the right to purchase
their pro rata portion of new equity securities the Company issues, other than
certain exempt issuances.

7. LONG-TERM LIABILITY

In conjunction with the opening of new campuses in Chesapeake, VA and
Newport News, VA during 2001, the Company was reimbursed by the lessors for
improvements made to the leased properties in the amount of $763,000. In
accordance with Financial Accounting Standards Board Technical Bulletin No.
88-1, these reimbursements were capitalized as leasehold improvements and a
long-term liability established. The leasehold improvements and the long-term
liability will be amortized on a straight-line basis over the corresponding
lease terms, which range from 5 to 10 years.

8. OTHER EMPLOYEE BENEFIT PLANS

The Company has a 401(k) profit sharing trust covering all eligible
employees of the Company. Participants may defer a percentage of their salaries
or make contributions up to 10% of their base compensation. Employee
contributions are voluntary. Discretionary contributions were made by the
Company in the fourth quarter of each year, and were $186,000, $195,000 and
$205,000 for the years ended December 31, 1999, 2000 and 2001, respectively.

In May 1998, the Company adopted the Strayer Education, Inc. Employee
Stock Purchase Plan (ESPP). Under the ESPP, eligible employees may purchase
shares of the Company's common stock, subject to certain limitations, at 90
percent of its market value at the date of purchase. Purchases are limited to
10 percent of an employee's eligible compensation. The aggregate number of
shares of common stock that may be made available for purchase by participating
employees under the ESPP is 2,500,000 shares. During 1999, 2000 and 2001,
11,962, 10,297 and 6,540 shares, respectively, were purchased in the open
market for employees, at average prices of $26.13, $23.93 and $42.44 per share,
respectively.

F-26

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. COMMITMENTS AND CONTINGENCIES

The University 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 Company's financial
position, results of operations or cash flows.

As of December 31, 2001 the Company had long-term operating leases for
fourteen of its campuses and other administrative locations. Rent expense was
$4,227,000, $4,770,000 and $5,533,000 for the years ended December 31, 1999,
2000 and 2001, respectively. Prior to the purchase of three of these campuses
in February 2002, the Washington D.C. campus and three of the Virginia campuses
were leased from entities affiliated with the Company's former CEO and majority
stockholder. Rent paid to these entities was $2,040,000, $1,836,600 and
$1,946,000 for the years ended December 31, 1999, 2000 and 2001, respectively.
During 1999, the Company acquired its Takoma Park Campus for $1,024,000 and in
February 2002, the Company acquired the Washington D.C., Manassas, VA and
Woodbridge, VA campuses for an aggregate of $12,000,000 from entities
affiliated with the Company's former CEO and majority stockholder. Accordingly,
only one lease remains outstanding with affiliates of the Company's former CEO
and majority stockholder. This lease involved total payments of $320,000 in
2001 and expires in 2006.

The rents on the Company's leases are subject to annual increases based on
a stipulated price index. The minimum rental commitments for the Company as of
December 31, 2001, excluding commitments related to the three campuses
purchased from the Company's former CEO and majority stockholder in February
2002, are as follows (in thousands):

TOTAL AMOUNT PAYABLE
TOTAL TO RELATED PARTIES
--------- ---------------------

2002 ............... $ 4,780 $ 338
2003 ............... 4,339 348
2004 ............... 3,324 358
2005 ............... 3,000 369
2006 ............... 2,241 156
Thereafter ......... 9,849 --
------- ------
$27,533 $1,569
======= ======

In addition, the Company has a credit facility from a bank in the amount
of $10.0 million. Interest on any borrowings under the facility will accrue at
an annual rate not to exceed 0.75% above the London Interbank Offered Rate. The
Company does not pay a fee for this facility. There have been no borrowings by
the Company under the credit facility.

On October 2, 1998, the Board of Directors authorized the Company to
repurchase up to five percent of its outstanding common stock at market prices,
not to exceed a total cost of $24 million. The timing of stock purchases are
made at the discretion of management. The Company repurchased 630,429 shares
and 62,700 shares during the years ended December 31, 1999 and 2000,
respectively. During the year 2000, the Board authorized an additional stock
repurchase program in an amount of up to $40,000,000. The Company suspended the
repurchase plan from February to September of the year 2000 and again in
December of 2000. No shares were repurchased during 2001. No share repurchase
plan is currently authorized by the Board of Directors.

F-27

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. INCOME TAXES

The income tax provision for the years ended December 31, 1999, 2000 and
2001 is summarized below (in thousands).

1999 2000 2001
---------- ---------- ----------

Current:
Federal ............... $10,453 $11,637 $12,123
State ................. 2,295 2,484 2,222
------- ------- -------
12,748 14,121 14,345
======= ======= =======
Deferred:
Federal ............... (203) (132) 129
State ................. (45) (15) 15
------- ------- -------
(248) (147) 144
------- ------- -------
$12,500 $13,974 $14,489
======= ======= =======

The tax effects of the principal temporary differences that give rise to
the Company's deferred tax assets (liabilities) are as follows as of December
31, 2000 and 2001 (in thousands):

2000 2001
--------- -------

Tuition receivable and student loans ............... $ 372 $387
Property and equipment. ............................ 283 140
Accrued vacation payable ........................... 50 34
Unrealized gains on marketable securities .......... (258) --
------ ----
Net deferred tax asset ............................. $ 447 $561
====== ====

A reconciliation between the Company's statutory tax rate and the
effective tax rate for the years ended December 31, 1999, 2000, and 2001 is as
follows:

1999 2000 2001
--------- --------- -------

Statutory federal rate. .............................. 35% 35% 35%
State income taxes, net of federal benefits .......... 5% 5% 4%
Effect of prior year accruals ........................ (1%) (1%) 0%
-- -- --
Effective tax rate ................................... 39% 39% 39%
== == ==

Cash payments for income taxes were $12,674,000 in 1999, $13,628,000 in
2000 and $11,649,000 in 2001.

F-28

STRAYER EDUCATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial information for 2000 and 2001 is as follows (in
thousands except per share data):

QUARTER
---------------------------------------------------------
2000 FIRST SECOND THIRD FOURTH
---- ------------ ------------ ------------ ------------

Total revenues ................. $ 21,128 $ 20,325 $ 14,691 $ 22,070
Income from operations ......... 10,423 8,432 2,192 9,880
Net income ..................... 6,810 5,878 2,126 6,895
Net income per share:
Basic ....................... $ 0.45 $ 0.38 $ 0.14 $ 0.45
Diluted ..................... $ 0.44 $ 0.38 $ 0.14 $ 0.45

QUARTER
---------------------------------------------------------
2001 FIRST SECOND THIRD FOURTH
---- ------------ ------------ ------------ ------------

Total revenues ................. $ 23,644 $ 23,826 $ 18,222 $ 27,184
Income from operations ......... 11,459 9,262 2,744 10,042
Net income ..................... 8,137 6,248 2,008 6,416
Net income available to common
stockholders ................. 8,137 5,293 11 4,358
Net income per share:
Basic ....................... $ 0.53 $ 0.45 $ 0.00 $ 0.52
Diluted ..................... $ 0.53 $ 0.42 $ 0.14 $ 0.45

F-29

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the fees and expenses payable by the
registrant in connection with this offering, other than underwriting discounts
and commissions. All the amounts shown are estimates, except the SEC
registration fee:

SEC registration fee .................... $ 11,933
NASD fee ................................ $ 13,500
Printing fees ........................... $ 25,000*
Legal fees and expenses ................. $250,000*
Accounting fees and expenses ............ $ 75,000*
Miscellaneous fees and expenses ......... $124,567*
--------
Total .................................. $500,000*
========

* Estimated.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Strayer'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 Strayer shall have any liability to
Strayer 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 proved 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. Strayer's
charter and bylaws provide that it shall indemnify and advance expenses to its
currently acting and former directors and officers to the fullest extent
permitted by the Maryland General Corporation Law and that Strayer 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.

Strayer's charter and bylaws provide that it will indemnify its directors
and officers and may indemnify employees or agents of Strayer 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
Strayer. In addition, Strayer's charter provides that its directors and
officers will not be liable to stockholders for money damages, except in
limited instances. However, nothing in Strayer's charter or bylaws 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

ITEM 16. EXHIBIT INDEX.

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------

1.1* Underwriting Agreement
4.1 Amended Articles of Incorporation of Strayer Education, Inc.
(incorporated by reference to Strayer Education, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2001
(File No. 000-21039))
5.1* Opinion of Venable, Baetjer and Howard, LLP
23.1* Consent of PricewaterhouseCoopers LLP
23.2* Consent of Venable, Baetjer and Howard, LLP (included in
Exhibit 5.1)
24.1+ Power of Attorney (included on the signature pages)

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

* Filed herewith.

+ Previously filed.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

o For purposes of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement 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.

o Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 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, 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.

o 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.

o 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-2

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Arlington, State of Virginia, on the 1st day of
November, 2002.

STRAYER EDUCATION, INC.

By: /s/ Robert S. Silberman
---------------------------------
Name: Robert S. Silberman
Title: Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons on
behalf of Strayer Education, Inc. in the capacities indicated on the 1st day of
November, 2002.

SIGNATURE TITLE
--------- -----

* Chairman of the Board
----------------------------------
Steven B. Klinsky

/s/ Robert S. Silberman Chief Executive Officer, President and
---------------------------------- Director (Principal Executive Officer)
Robert S. Silberman

/s/ Mark C. Brown Senior Vice President and Chief
---------------------------------- Financial Officer (Principal Financial
Mark C. Brown and Accounting Officer)

* Director
----------------------------------
Charles Ayres

* Director
----------------------------------
Dr. Charlotte F. Beason

* Director
----------------------------------
William E. Brock

* Director
----------------------------------
David A. Coulter

II-3

SIGNATURE TITLE
--------- -----

* Director
----------------------------------
Gary Gensler

* Director
----------------------------------
Robert R. Grusky

* Director
----------------------------------
Todd A. Milano

* Director
----------------------------------
G. Thomas Waite, III

* Director
----------------------------------
J. David Wargo

*By: /s/ Steven A. McArthur
-------------------------------
Steven A. McArthur
Attorney-in-Fact

II-4