1 Introduction

Over the last 25 years, private higher education has undergone various cycles and, especially, in the turn of the 21^st century, with a strong demand in the education market, the opening of new higher education institutions has enabled access for several groups turning dreams into reality. However, such access was still only for the few who were able to commit to the payment of monthly tuition fees, since the increased number of admissions happened predominantly in the private sector.

As of 2005, student body profile gradually changed and the number of black and brown students in higher education increased, as well as the proportion of students enrolled from public schools and families with more vulnerable social-economic backgrounds (^{SANTANA, 2010}). Several public policies adopted from President Luiz Inácio Lula da Silva’s government (2003-2010) such as the University for All Program (Prouni), and the Student Financing Fund (Fies), promoted the enrollment and retention of students who by then had been excluded from higher education.

In 2015, the financial crisis and fiscal austerity policy (constitutionalized by Constitutional Amendment no. 95, on 12.15.2016) impacted all economic sectors. And it was no different for the higher education industry, which felt the gradual process of reduced Fies grants. In the second half of the 2010s, with the lack of public state sources of student financing, the continuous process of expansion, and, therefore, maintenance of education companies’ financial results, as will be shown in this research, was enabled by the increased number of students recruited into distance education (DE) courses, with significantly lower monthly tuition fees.

Understanding the consequences of Fies’ strong shrinkage, there’s the intention to analyze commercial alternatives developed by education business groups to minimize the impacts of the reduced offer of public financing, showing that DE was the main strategy adopted to maintain the segment’s expansion, targeting this course modality towards students with lower purchasing power, from the normative frameworks edited during President Michel Temer’s administration (08.2016-2018).

This is a documentary research, that has analyzed the management reports for fiscal years 2020 and 2021 of five Brazilian companies in the higher education segment, whose actions are freely traded on the national stock exchange. In addition to those reports, the research also considered other documents, such as news reports, varying normative sources, and statistical data from the National Institute of Educational Studies and Research Anísio Teixeira (INEP), the Ministry of Finance (2018), the consulting company ^{Hoper Educação (2021)}, and the Union of Higher Education Sponsoring Entities in São Paulo (^{SEMESP, 2022}). The goal was to understand the movement of higher education corporate groups in offering distance education courses, in face of Fies' gradual shrinking process.

2 Brazilian Higher Education’s Massification and Diversification

The enactment of the new Law of Directives and National Educational Bases (LDB), Law no. 9,394 of 12.23.1996 (^{BRASIL, 1996}), is the starting point of the implementation of policies to increase access to higher education in Brazil. However, those policies became even more assertive as of the 2000s, with the beginning of the process of access massification, since, so far, enrolling and remaining in Brazilian higher education was a privilege of the social elite. The term massification indicates that higher education gradually opens itself to the population’s varying layers, meaning, “it is no longer restricted to smaller groups, often those better socially positioned in a certain society. That is, it no longer, strictly speaking, belongs to the elite” (^{ALMEIDA, 2014, p. 28}).

The growth in the number of enrolled students was mostly directed towards the private sector (^{MARTINS, 2008}), from the increased number of higher education institutions (HEI) during President Fernando Henrique Cardoso’s administration (1995-2002), with several legal arrangements, such as Decree no. 2,306 (BRAZIL, 1997), which allowed the existence of higher education institutions maintained by corporate entities in “any of the forms allowed by law, of a civil or commercial nature”. Until then, all private HEI were under the format of civil associations or foundations, non-profit corporate entity models. Such decree was the key seed for the birth of large higher education corporate groups, that currently play a leading role in the Brazilian market.

During President Luiz Inácio Lula da Silva’s administration (2003-2010), the industry’s growth rhythm continued, already with the dominance of large business groups, organized to achieve high profitability, starting mergers, and acquisitions. It was during that time that the first IPO on the stock exchange occurred (Anhanguera Educacional), in 2007 (^{LIMA et al., 2019}), and the entry of international capital in the Brazilian higher education market (^{JARDIM; ALMEIDA, 2016}).

During President Dilma Rousseff’s administration (2011-2016) and following governments (President Michel Temer, 2016-2018; President Jair Bolsonaro, 2019-2022), a reduced growth rhythm regarding the number of private institutions is noticeable, which indicates a moment of market stabilization, with a reduced number of small-sized institutions, either acquired or incorporated by large corporate groups in the education area (^{SEMESP, 2022}).

Massification, as argued by ^{Senkevics (2021)}, is the first step towards democratization, providing not only a higher number of students, but also – and above all – diversifying this access to the population’s poorest layers (^{SILVEIRA et al., 2021}). Along the same line, ^{Nogueira (2018, p. 22)} states that the terms diffusion and massification refer to a wider access to higher education; in turn, democratization goes beyond that, since it presupposes “equal access opportunities to different school titles”, as well as social capital accumulation aimed at reducing the weight of social backgrounds in determining school paths.

From President Luiz Inácio Lula da Silva’s first two governments (2003-2010), public authorities also adopted a series of policies with the role of enabling the access of students who had until then been excluded, “for disadvantages related to characteristics that cannot be controlled” (^{ROSSETTO; GONÇALVES, 2015, p. 793}) such as, for example, their ethnic background or social-economic status that, with a policy of equal opportunities, cannot represent an element that limits or hinders access. As such, there hasn’t been only the widening of higher education’s access base (massification) but also, a diversification of student group profile, reaching a percentage of the more vulnerable population. Beyond massification, that is, expanding the base with an increased number of higher education admissions, public policies enabled access diversification, making this a reality for students from poorer families. Fies is one of those policies.

3 The Public Student Financing Program: Fies

Despite the Student Financing Program having originated during the military regime that established, in 1975, the Educational Credit Program, current guidelines were established in 2007 and, gradually, Fies’ financing structure became more appealing to students. With changes having been made to Fies during 2009 and 2010, and the progressive increase of the budget allocated for this line of credit, an increase in the number of new contracts signed began already in 2011, as seen on Table 1, with its peak in 2014, a year when 733 thousand new financing contracts were hired. As a result of easy conditions when hiring the loan, a first major effect was visible: “the surge in the number of students who started benefitting from the program” (^{ALMEIDA, 2020, p. 11}).

At the end of President Luiz Inácio Lula da Silva’s government (2003-2010), Fies’ financing structure became more appealing to students. In 2009, Law no. 11,941 (BRAZIL, 2009) was enacted, which increased the grace period prior to the start of the financing payments, and, in 2010, with new norm changes (Law no. 12,202, BRAZIL, 2010), financing agents (Caixa Econômica Federal and Banco do Brasil) were released from the condition of partial guarantors for the financing granted and, with that, began acting more aggressively in the market. Still in 2010, other important changes included the edit of Resolution no. 3,842 (^{BANCO CENTRAL DO BRASIL, 2010}), reducing the effective interest rate of Fies contracts to 3.4% a year (until then, interest rates were at 6.5% a year), and Normative Ordinance no. 10 (^{MINISTRY OF EDUCATION, 2010}), which started waiving the need for students to provide any guarantees, as long as they adhered to the Educational Credit Operations Guarantee Fund (FGEDUC). With those changes to Fies during the years 2009 and 2010 and the progressive increase of the budget allocated to this line of credit, in 2011 the number of new contracts began to escalate.

As of 2015, as shown on Table 1, Fies contracts were heavily reduced, with the target group being restricted to students with a household income per capita of up to 3 minimum-wage salaries, high interest rates, increased student share in the payment of the course’s monthly tuition, and the sharing of educational fees with higher education institutions.

Two ordinances were edited in December 2014, under President Dilma Rousseff’s administration (2011-08.2016), with important changes to the financing contracting model, including the requirement of proof by the student of having obtained a minimum score of 450 points on ENEM (National High School Exam), and a score other than zero on the essay (^{MINISTRY OF EDUCATION, 2014a}), as well as the return of a mandatory guarantor on the contracts (^{MINISTRY OF EDUCATION, 2014b}).

While under President Michel Temer’s government, the policy of fiscal austerity was constitutionalized, with the edit of Constitutional Amendment no. 95 (BRAZIL, 2016), which froze primary expenditures (intended to fund public services to society) for 20 years (with possibility of review after 10). This situation resulted in an expressive and gradual reduction of the budget allocated to Fies and, as a consequence, financing offers to new students, as can be seen in Table 1.

Despite all criticism aimed at Fies (^{PINTO, 2016}; ^{ALMEIDA, 2020}), especially in the aspect of promoting the financing of private HEI, based on the premise that there has been a powerful growth in the number of Fies contracts, especially between 2011 and 2014, as seen in Table 1, it is possible to state that this growth was stronger among students from families with a lower per capita income. As such, while in 2010, 72.4% of students benefiting from the program were from families with a per capita income of up to 2 minimum-wage salaries, in 2014, this percentage grew to 98.1% (^{MINISTRY OF FINANCE, 2018}). At the same time, there was also an important development in the number of contracts stablished by Indigenous, black, or brown people. In 2010, this percentage was only 36.8%, while in 2014, the participation of Indigenous, black, and brown people grew to 60.3% (^{MINISTRY OF FINANCE, 2018}).

However, from playing a leading role in the first half of the 2010s, to becoming a mere supporting player as of 2015, Fies struggles as it arrives in the 2020s. In its contradictions, it is seen as a public policy that has provided the effective diversified inclusion of students from poorer social classes in higher education and, at the same time, as an important financing tool for education business groups, ensuring revenues and students.

Fies’ gradual shrinking as of 2015 demanded that education business groups sought alternatives to maintain financial profitability and enrollment growth percentages. The weakening of this important public policy caused an education market reaction, as the maintenance of the growth surge, that the segment had been witnessing since the start of the 21^st century, demanded the inclusion of students from vulnerable social classes, without whom this growth rate would not be maintained. The offer greatly increased, and the consumer market could not be reduced, under penalty of causing a severe financial crisis in the industry. That was the logic followed by the education business segment.

4 The development of commercial strategies by higher education business groups

There are no blank spaces in capitalism and the gap left by Fies needed to be filled to maintain the growth rhythm of the private education segment. The concern towards continuing to reach class C, D, and E students caused the segment to re-think the tuition pricing policy installed since the beginning of the 21^st century. It still wasn’t a commercial strategy, but rather the first reactive movement to maintain student retention.

Table 2 reproduces a study conducted by the educational consulting company Hoper and shows the development of average tuition fees for in-person and distance education courses practiced by private HEI, between 2005 and 2021 (for distance education courses, values started being consulted only in 2012). The values shown are updated by the customer price index and, as such, price inflation can be ignored for the analyses. The consulting company informs that to gather an average monthly fee, 18,071 prices were collected between November 2020 and February 2021, considering a universe of 24,465 courses.

Focusing initially on in-person courses, Table 2 shows that between 2005 and 2010 the average cost implemented by those courses offered by private HEI maintain a constant and gradual process of reduction. However, the rhythm is interrupted in 2011, starting an increasing cycle until 2016 when, again, a new reduction cycle starts, lasting until 2021.

Table 2 shows three distinct and clear phases of the pricing policy exerted by private HEI for in-person courses.

On the first phase, between 2005 and 2010, average monthly tuition costs for in-person courses undergoes a reduction process. It is a period when the first large education business groups are being formed and focusing their student recruitment process on pricing marketing, where the main differential offered is the low monthly tuition costs. This movement causes the average price of tuition to fall.

On the second phase, between 2010 and 2015, the average cost of tuition fees exerted has the tendency to increase, a period that coincides with Fies’ peak prominence, which can be observed on Table 1. During this first period, public power becomes the main “client” of education business groups that, with the security of a good-paying partner, start a policy of real increase of monthly fees practiced, targeting occasional discounts (of commercial nature) towards the general public, not granted to those who benefit from Fies.

The economic crisis that started in 2015 and the process of Fies shrinkage causes educational business groups to review pricing policies, starting a third phase of pricing policies: in Table 2, it is noted that as of 2016, a process of reduction of average monthly tuition costs starts, lasting until 2021.

As it happens, simply reducing average monthly costs for in-person courses wasn’t enough; nor was it recommended, since this reduction could impact the financial survival of private HEI. After all, a plain price reduction would affect all groups, that is, both students from classes A and B, as well as students from classes C, D, and E. The situation demanded, therefore, more than the mere reaction to reduce the price charged.

Distance education has existed since the 19^th century, with the most varied models and types of correspondence courses. In its creation, the goal was to provide knowledge to people who were isolated and distant from large urban centers. However, it is from the 21^st century onward, with the support of new highly accessible technologies, that this modality gains a new aspect. Despite distance education not being something new in the current century, it is of this century that a process of structurization begins in Brazil, until it reaches its current form.

With the constant reduction in the number of new Fies contracts, noticed in Table 1 as of 2015, large business groups that act in the education segment began pushing public authorities towards regulatory changes that would make it easier to open and offer distance education courses. In 2017, a set of public policies in higher education allowed and promoted the substantial expansion of the offer of distance education courses. Effectively, in President Michel Temer’s government, Decree no. 9,057 (BRAZIL, 2017), from 25 May 2017, that brought forth a new regulatory milestone for the segment, with substantial legal changes to the authorizing and assessment processes of courses and support centers. Among the measures, the Decree grants authorization to HEI accredited in the distance education modality, with autonomy, to offer courses in this modality regardless of authorization, only informing the Ministry on the creation of the course, “for the purposes of supervision, assessment, and subsequent recognition”. On the last days of President Michel Temer’s government, Ordinance no. 1,428 (^{MINISTRY OF EDUCATION, 2018}) was edited, fundamental for what is currently called hybrid learning, that is, courses offered and regulated in the inperson modality, but with an expressive part of its courseload (up to 40%) offered online. All these regulations allowed for large scale opening of distance education centers and made it even easier to expand the offer of courses in this modality.

An enabling environment was created for the growth of distance education courses, with the support from public policies that meet the interests of economic groups (^{DIAS SOBRINHO, 2015}) in the segment.

Table 3 displays this movement, year by year, allowing a comparison of the number of students enrolled in public and private HEI, over an eight-year period, between 2014 and 2021. In 2015, for example, the year when Fies’ shrinkage process began, out of a total quota of 8 million enrollments in the higher education system, 6.6 million students were in the in-person modality, while only 1.4 million were in distance education. Year after year, this difference had been decreasing, until 2021, when the number of students enrolled in distance education in the private segment exceeded the number of students in in-person courses.

And this trend must continue in the upcoming years, especially when analyzing the number of students enrolling. Data provided by ^{Inep (2022)} indicates that in 2021, of a total of 3.94 new students in the higher education segment (both public and private), 1.46 million students have opted for in-person courses, while 2.47 million have chosen courses in distance education, which represents 62.8% of new students enrolled in that year.

To keep up with the higher number of students enrolled in distance education, the number of courses offered increased. Table 4 shows the quick growth of courses offered in this graduation modality: in six years, the number of courses grew more than fourfold. When considering only those offered by private HEI, this growth was five times higher. In 2015, there were 1,476 courses, with 1,054 being offered by private institutions; six years later, in 2021, the total number reached 7,620, with 7,075 (over 92%) maintained by private institutions.

In addition to the increased number of courses and vacancies, the greater number of students in higher education in distance education was also enabled by regulatory milestones that made it easier to open campuses that, in practice, are points of sale for distance education courses. Meeting the interests of business groups, Normative Ordinance No. 11 (^{MINISTRY OF EDUCATION, 2017}), which regulated Decree no. 9,057 (BRAZIL, 2017), allowed HEI accredited to offer distance education courses to create their own centers, regardless of previous authorization, as long as their Conceito Institucional (Institutional Rating) was positive: HEI with a score of 3 were granted permission to open up to 50 centers a year; 150 centers a year for institutions with a score of 4; and 250 centers a year for institutions that scored a 5.

As such, the increase in the number of centers from 2017 to 2018 was over 100%, as displayed on Table 5, maintaining its growth rhythm in the following years. The difference in the entire period was extremely significant: from 4,913 centers in 2014 to 31,497 centers in 2021.

Scattered across Brazil, often with minimal physical installations, the centers are used to recruit students for distance education courses. Such establishments are usually maintained by HEI’ commercial partners, that design the center following their guidelines, receiving a percentage of its profit, forming a partnership quite similar to that of the existing commercial franchising system.

Surely time flexibility and the possibility to study without having to commute to HEI’ campuses are key differentials for those who opt for distance education courses. However, the industry’s aggressive pricing policy is the siren’s song to attract students.

Focusing on the monthly cost of distance education courses, also displayed on Table 2, it can be seen that during the period assessed (2012-2021), the average price has been steadily decreasing. And this gradual decrease is explained by the education market’s own logic: the offer of distance education has grown significantly, either due to the increased number of courses, or the increased number of centers, so that those courses’ profitability is now maintained by the number of students enrolled, with large-scale gains, since a higher number of students in this modality doesn’t equal, at the same rate, higher expenses in terms of infrastructure, professors, or tutors.

The reduced cost of in-person courses’ monthly tuition fees has also favored the reduced cost of courses offered in distance education, more evidently. Table 2 shows that, in 2012, the average cost of monthly tuition fees practiced in distance education courses was nearly half (49.1%) of the price practiced in in-person courses. Year after year, this difference has been increasing in such a way that, in 2021, the average cost of monthly tuition fees practiced by distance education courses equaled only 32.8% of the average cost practiced by in-person courses.

5 There are no Blank Spaces in Capitalism

The capitalist market is dynamic, and it is no different in the education market, especially in the higher education segment. In the first half of the 2010s, Fies was a public policy that, at the same time as it enabled access to higher education for students from more vulnerable social strata, it also promoted the transfer of public capital for private HEI which, with this financial boost and support from national and international capital market investors, have transformed Brazilian higher education into a big business.

Fies’ shrinkage demanded quick and effective answers from the education market, to maintain its growth and profitability rhythm, especially for private HEI with shares traded on the stock exchange, prone to economic pressures for positive operational results and significant dividend sharing.

The focus was on maintaining student recruitment and, to do so, it was necessary to continue reaching the population’s more vulnerable layers, not for ideological reasons, but rather to maintain financial results being produced by education business groups. Filling the gap left by Fies’ agony was necessary and, in the absence of public policies, private HEI sought commercial strategies to maintain access to higher education for this segment of the population. The increased offer of distance education courses, with prices quite lower than those practiced by in-person courses was the main strategy by those education groups to enable higher education to students from families with per capita income not contemplated by Prouni.

To support this claim, an analyses of the last two management reports (2020 and 2021) of five education business groups publicly traded on the Brazilian stock exchange was conducted, with the goal of demonstrating that the expansion of distance education was decisive for maintaining the growth of the main education players in the national market.

In 2022, five education companies had their shares freely traded on the Brazilian stock exchange, currently called B3 (previously Bovespa). Those are: Cogna Educacional, Yduqs Participações, Ser Educacional, Cruzeiro do Sul Educacional, and Ânima Educação. Those companies have their capital stock fractioned into shares that are traded on the market, so that anyone may acquire them, becoming a shareholder in the company to receive dividends, whenever business activity results are profitable. It is a highly regulated and controlled market, to provide safety and attract investors around the world. One of the regulatory tools to provide transparency and credibility to investors is those companies’ obligation to periodically render public accounts, detailing all their operations, financial results, and strategic plans.

6 Conclusions

The goal was to demonstrate that with Fies’ gradual shrinkage, as of 2015, education business groups found alternatives to maintain financial profitability and the number of enrolled students, targeted towards recruiting students from poorer social classes. Without sources of public funding, recruiting more vulnerable students would be limited to Prouni, which, in practice, implies only tax benefits for adhering institutions; not providing revenue.

Under such circumstances, almost reactively, as of 2016, the private higher education industry started a movement to reduce the average cost of monthly tuition fees for in-person courses, interrupting years of real increase: the average ticket began a process of reduction, in such a way that the average cost of monthly tuition fees practiced in 2021 represented 79% of the value practiced in 2016.

From this perspective, and analyzing the average cost of monthly tuition fees, the historical cut between 2005 and 2021 has demonstrated that between the years 2011 and 2015 was the only period with real growth of the average price practiced. It is precisely at the moment when Fies was the key player in the education market, even financing nearly a fourth of students in private HEI (in 2014).

The private education segment soon noticed that reducing the cost of monthly tuition fees would not solve the issue and it would certainly lead several private HEI to financial ruin. The situation demanded the development of commercial strategies to maintain the growth rhythm in the number of students in higher education, as well as financial profitability, an extremely important factor for their shareholders. From Fies’ shrinkage, after strong lobbying from the industry, public authorities edited, in 2017 and 2018, a series of decrees that, gradually, allowed the increased offer of distance education courses, as well as the inclusion of online content for in-person courses (which started being referred to as a hybrid model). Following this logic, in 2014, the year when Fies was at its peak, the share of private education distance education enrollments represented 15.3%, while in-person was responsible for 59.6% (the rest, that is, 25.1%, was in the public sector); seven years later, in 2021, distance education participation more than doubles, reaching 39.4% of enrollment and surpassing the enrollment percentage of in-person courses (37.4%) in the private sector (the rest, that is, 23.1%, was in the public sector). And DE’s participation in the education market is still growing, so much so that in 2021, the number of new students in distance education courses surpassed the number of in-person students, confirming the continuation of this trend.

This strategy focuses on filling the gap left by Fies’ agony. The analysis of the management reports of five education companies with shares traded in the Stock Exchange has shown that those companies have maintained the quantitative growth of their student base by increasing the offer of distance education courses. The reports have shown this market segment as the preferred niche for the upcoming years and, as part of this strategy, the higher number of support centers has been singled out as a foundation for this growth.

Lacking public policies that enable the access and retention of students from poorer social-economic backgrounds in higher education, the education market – with the support of public authorities – has adopted as a strategy the increased offer of distance education courses to attract this student profile, with quite affordable prices, when compared to those practiced by in-person courses.