AS FILED WITH THE
QuickLinks-- Click here to rapidly navigate through this documentAs filed with the Securities and Exchange Commission on February 25, 2004
Registration No. 333-112449
SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 2002
REGISTRATION NO. 333-100407
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
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)

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

(Exact name of registrant as specified in its charter)
1100 Wilson Blvd., Suite 2500
Arlington, VA 22209

MARYLAND 8200 Maryland (703) 247-2500 52-1975978
(State
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer

Incorporation or Organization) Classification Code Number) (Address, including zip code, and telephone number, including
area code, of registrant's
principal executive offices) (I.R.S. Employer
Identification No.)
- -----------------------------------------------------------------------------------------
Steven A. McArthur, Esq.
Senior Vice President and General Counsel
Strayer Education, Inc.
1100 WILSON BLVD.Wilson Blvd., SUITESuite 2500
ARLINGTON,
Arlington, VA 22209
(703) 247-2500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

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

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,
(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

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
Peter J. Hanlon, Esq.
Jeffrey S. Hochman, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
(212) 728-8000 John R. Sagan, Esq.
Michael L. Hermsen, Esq.
Mayer, Brown, Rowe & Maw LLP
190 South LaSalle Street
Chicago, IL 60603
(312) 782-0600
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 formForm are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ]o
If any of the securities being registered on this formForm 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. [ ]o
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. [ ]o
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. [ ]o
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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o
CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be registered
Amount
to be
registered (1)
Proposed
maximum
offering price
per share (2)
Proposed
maximum
aggregate offering
price(1)(2)
Amount of
registration
fee
Common stock, par value $.01 per share 3,450,000 shares $112.69 $388,780,500 $49,259 (3)
(1)
Includes an aggregate of 300,000450,000 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 theThe Nasdaq National Market on October 4, 2002.
January 30, 2004.

(3)
Previously paid.

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

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

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), MAY DETERMINE.
================================================================================
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

------------FEBRUARY 25, 2004

3,000,000 Shares

Common Stock
The shares of common stock are being sold by the selling stockholders. We will not receive any of the proceeds from the sale of the shares of common stock sold by the selling stockholders.
Our common stock is traded on theThe Nasdaq National Market under the symbol "STRA." On October 31, 2002,February 25, 2004, the last reported sale price of our common stock was $53.10$106.70 per share.
The underwriters have an option to purchase a maximum of 300,000450,000 additional shares from onecertain 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.

Investing in our common stock involves risks. See "Risk Factors" on page 7.

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

Price to
Public Underwriting
Discounts and
Commissions Proceeds
to Selling
Stockholders
Per Share ......... $ $ $
Total ............. $ $ $
Delivery of the shares of common stock will be made on or about , 2002.2004.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the
adequacydetermined if this prospectus is truthful or accuracy of this prospectus.complete. Any representation to the contrary is a criminal offense.

CREDIT SUISSE FIRST BOSTON

BANC OF AMERICA SECURITIES LLC

LEGG MASON WOOD WALKER
INCORPORATED

Credit Suisse First Boston

Banc of America Securities LLC

JPMorgan

Legg Mason Wood Walker
Incorporated

Lehman Brothers

Thomas Weisel Partners LLC
The date of this prospectus is , 2002.

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

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2004.
Strayer University
Locations and Approvals
(number of existing campuses in parentheses)
TABLE OF CONTENTS

PAGE
----

Page
PROSPECTUS SUMMARY .................................................... 1
RISK FACTORS .......................................................... 8
7
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS ......................................... 14
13
USE OF PROCEEDS ....................................................... 15
DIVIDEND POLICY ....................................................... 15
14
PRICE RANGE OF COMMON STOCK ........................................... 14
CAPITALIZATION 15
CAPITALIZATION ........................................................
BUSINESS 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
38

SELLING STOCKHOLDERS .................................................. 47
42
DESCRIPTION OF CAPITAL STOCK .......................................... 48
44
UNDERWRITING .......................................................... 55
52
NOTICE TO CANADIAN RESIDENTS .......................................... 57
54
LEGAL MATTERS ......................................................... 58
55
EXPERTS ............................................................... 58
55
WHERE YOU CAN FIND MORE INFORMATION ........................................................ 58
56
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ............................................. 59
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS ......................................................... F-1
56

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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.

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 or incorporated by reference 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 300,000450,000 additional shares from one of the selling stockholders is not exercised.

COMPANY SUMMARY

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.University Online. Strayer University prides itself on making post-secondary education accessible to working adults who missed or were previously unable to take advantage of higher 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, education and public administration at 2027 physical campuses in Pennsylvania, Maryland, Washington, D.C., Virginia, North Carolina, South Carolina and Washington, D.C.Tennessee. As of September 30,
2002,December 31, 2003, we had more than 16,50020,000 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,University 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 internalorganic 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 2027 campuses in threesix states and Washington, D.C., with six13 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 ONLINEUniversity Online in 1997, we have experienced rapid growth, with 6,82210,615 students enrolled in at least one class through Strayer ONLINEUniversity Online during the 20022003 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 aggressivea diligent program to open new campuses. As a result of these efforts, between 2000 and 2003 the rate of growth in our total revenues grew 19% last yearincreased to 23% on a compound annual basis, as our revenues increased from $78.2 million in 2000 to $92.9$147.0 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 over2003. During the same period, diluted earnings per share grew at a compound annual rate of 17%, as we continued to invest heavily 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

Industry Background And Outlook
The market for post-secondary education is large, growing and highly fragmented. Total expendituresThe U.S. Bureau of Labor Statistics reports that approximately 60 million working adults 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.United States do
1

not have higher than a high school education. 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

Company Strengths
We have a 110-year112-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.
•
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 PRACTICAL AND DIVERSIFIED CURRICULA.

•
Practical 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. 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 FOCUS ON WORKING ADULTS PURSUING DEGREE PROGRAMS.

•
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, bachelorbachelor's and graduate-level degree programs results in extended periods of student enrollment and positively impactsimproves the visibility and predictability of our future revenues. Approximately 95%94% of our students were enrolled in degree programs as of September 30,
2002.

o FLEXIBLE PROGRAM OFFERINGS.for the 2003 fall term.

•
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 ONLINEUniversity Online to enable students to pursue a degree entirely online, thereby increasing the accessibility and flexibility of our high quality educational content.

o ATTRACTIVE AND CONVENIENT CAMPUS LOCATIONS.

o ESTABLISHED BRAND NAME AND ALUMNI SUPPORT.

•
Established brand name and alumni support. With a 110-year112-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 and support system fosters additional recruitment opportunities and assists students with job placement and career advancement.

o STRONG OWNER-ORIENTED MANAGEMENT TEAM.
2
•
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 Chairman and 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

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.
•
Maintain stable enrollment in our mature markets. At September 30,
2002,December 31, 2003, we had 1214 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.

•
Open new campuses. Our goal is to open two to three new campuses perevery year (including twowith five new campuses planned for 2004. Our objective is 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.ultimately be a nationwide university. We expect to expand our presence to capitalize on opportunities in geographic areas adjacent to our existing states of operation and elsewhere that exhibit strong enrollment potential. We opened three new campuses (in
Maryland and Virginia) in each of 2001 and began offering classes at three new2002, and five campuses in North Carolina on July 1, 2002.2003. Our new campuses typically have
typically turned profitable after five to six quarters of operation. Due to strong demand at our Raleigh-Durham campus,In 2004, 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 ofopened two new campuses for spring termenrollment—one in the State ofGreenville, South Carolina and one in Memphis, Tennessee, subject to reviewour second one there. In addition, two campuses are planned for Atlanta, Georgia and final
approval by the full Commission. Weanother one in a state where we currently 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.a campus.
•
Expand Strayer University Online. We actively market Strayer ONLINEUniversity Online to U.S. students throughout all 50 states and to international students on a global basis. Strayer ONLINEUniversity Online has demonstrated success at offering courses that are favored by working adult students because of their quality and convenience. Enrollment at Strayer ONLINEUniversity 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.

•
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 8090 corporations and government institutions and are actively working to increase the number of such arrangements.

o CONSIDER SELECTIVE ACQUISITIONS.

•
Optimize the use of stockholders' capital. 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 and academic standards. We also seek out operations that are located in geographic locationsareas 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.
3

2001 RECAPITALIZATIONRecapitalization
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 Redeemable Preferred Stock (the "Series A Preferred Stock") to an investor group led by New Mountain Partners, L.P. ("New Mountain") and including MidOcean Capital Investors, L.P. ("MidOcean") (formerly known as 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. GENERALIn February 2004, New Mountain deposited 350,000 of its shares of our Series A Preferred Stock (together with all associated accrued cash and stock dividends) (the "Trust Shares") into the New Mountain Strayer Trust, for the benefit of its partners. In this prospectus, we refer to New Mountain, the New Mountain Strayer Trust and MidOcean collectively as the "institutional selling stockholders." In addition, certain of our executive officers (such officers, together with the institutional selling stockholders, the "selling stockholders") will sell an aggregate of 115,000 shares in this offering, all of which underlie currently exercisable options, if the underwriters' over-allotment option is exercised in full.

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 theThe information contained on our websites to constituteis not a part of this prospectus.

THE OFFERING

The Offering
Issuer ............................. Strayer Education, Inc.
Common stock offered by the selling
stockholders ..................... 2,000,000 3,000,000 shares
Common stock to be outstanding after this offering .................... 10,352,412 13,470,395 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.December 31, 2003. The shares being offered by the institutional selling stockholders will be issued following conversion of shares of their existing Series A Preferred Stock.Stock and the partial exercise of an option currently held by the institutional selling stockholders. The total number of shares to be outstanding after this offering does not reflect:

o 4,003,869
•
1,169,873 shares of our common stock issuable upon conversion of the remaining shares of our
remaining Series A Preferred Stock (after giving effect to this offering) as of September 30, 2002 (including accruedDecember 31, 2003 (but including payment-in-kind dividends as of such date, butpaid through January 1, 2004, 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

•
1,131,667 shares of our common stock issuable upon exercise of outstanding stock options as of September 30, 2002 (ofDecember 31, 2003, of which 293,333options to purchase 506,662 shares are exercisable and 676,667options to purchase 625,005 shares are currently not exercisable. The outstanding options have a weighted average life of 5.64.7 years and a weighted average exercise price of $37.09$41.05 per share);share; and

o 579,405

•
334,405 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 DATADecember 31, 2003.
4

Summary Consolidated Financial And Other Data
The following table sets

INCOME STATEMENT DATA: Revenues ................................... $ 69,776

Costs and expenses: Instruction and educational support ...... 25,082 Selling and promotion .................... 7,765 General and administration ............... 9,405

Income from operations ..................... 27,524 Income before income taxes ................. 31,826 Net income ................................. 19,326 Preferred stock dividends and accretion.....

Net income available to common stockholders ............................. $ 19,326

Net income per share: Basic .................................... $ 1.25

Diluted .................................. $ 1.23

Weighted average shares outstanding: Basic .................................... 15,506

Diluted (a) .............................. 15,711

OTHER DATA: EBITDA (b) ................................. $ 29,418 EBITDA as % of revenue ..................... Depreciation ............................... $ 1,894 Capital expenditures ....................... $ 4,851 Cash dividends per common share ............ $ 0.24 Enrollment (d) ............................. 11,504 Campuses (e) ...............................

BALANCE SHEET DATA: Cash and cash equivalents ...................... Working capital (f) ............................ Total assets ................................... Long-term liabilities .......................... Total liabilities .............................. Mandatorily redeemable convertible Series A preferred stock ..................... Total stockholders' equity (deficit) .........

- ----------

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 inwhich are incorporated by reference into 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) $ 78,214 $ 92,876 $ 65,692 $ 82,547 -------- -------- -------- -------- --------- 28,187 33,699 24,119 29,768 8,480 12,576 8,727 12,537 10,620 13,094 9,381 12,757 -------- -------- -------- -------- --------- 42,252 47,287 59,369 42,227 55,062 -------- -------- -------- -------- --------- 30,927 33,507 23,465 27,485 35,683 37,298 26,872 28,727 21,709 22,809 16,393 17,524 -- -- 5,010 2,952 6,076 -------- -------- -------- -------- --------- $ 21,709 $ 17,799 $ 13,441 $ 11,448 ======== ======== ======== ======== ========= $ 1.42 $ 1.62 $ 1.13 $ 1.37 ======== ======== ======== ======== ========= $ 1.41 $ 1.55 $ 1.10 $ 1.21 ======== ======== ======== ======== ========= 15,324 10,970 11,851 8,352 ======== ======== ======== ======== ========= 15,451 14,737 14,847 14,485 ======== ======== ======== ======== ========= $ 32,990 $ 36,150 $ 25,409 $ 30,137 42.2% 42.2% 38.9% 38.7% 36.5% $ 2,063 $ 2,643 $ 1,944 $ 2,652 $ 4,388 $ 6,274 $ 5,074 $ 16,082(c) $ 0.25 $ 0.26 $ 0.195 $ 0.195 12,096 14,009 14,009 16,532 13 14 17 17 20 DECEMBER 31, SEPTEMBER 30, -------------------------------------- --------------------------- 1999 2000 2001 2001 2002 ---------- ---------- ------------ ------------ ------------ (in thousands) $12,213 $ 25,190 $ 57,659 $ 54,413 $ 44,695 18,170 26,742 49,846 43,734 48,665 98,096 119,139 110,488 109,250 135,906 141 -- 763 -- 1,911 17,035 21,395 29,513 34,351 42,957 -- -- 148,347 147,653 150,485 81,061 97,744 (67,372) (72,754) (57,536)
Year Ended December 31,
2001 2002 2003
(in thousands, except per share, percentage, enrollment and campus data)

Income Statement Data:
Revenues $ 92,876 $ 116,710 $ 147,025
Costs and expenses:
Instruction and educational support 33,699 41,601 53,116
Selling and promotion 12,576 16,773 22,768
General and administration 13,094 17,107 20,013
Gain on sale of asset — — 1,772
Income from operations 33,507 41,229 52,900
Secondary offering expenses — 490 —
Investment and other income 3,791 1,775 2,420
Income before income taxes 37,298 42,514 55,320
Provision for income taxes 14,489 16,730 21,646
Net income 22,809 25,784 33,674
Preferred stock dividends and accretion 5,010 7,344 5,136
Net income available to common stockholders $ 17,799 $ 18,440 $ 28,538
Net income per share:
Basic $ 1.62 $ 2.14 $ 2.67
Diluted $ 1.55 $ 1.78 $ 2.27
Weighted average shares outstanding:
Basic 10,970 8,617 10,694
Diluted (a) 14,737 14,516 14,857
Other Data:
EBITDA (b) $ 36,150 $ 44,381 $ 57,267
EBITDA as % of revenue (b) 38.9 % 38.0 % 39.0 %
Depreciation $ 2,643 $ 3,642 $ 4,367
Capital expenditures $ 6,274 $ 17,113(c ) $ 6,840
Cash dividends per common share $ 0.26 $ 0.26 $ 0.26
Enrollment (d) 14,009 16,532 20,138
Campuses (e) 17 20 25 5
December 31,
2001 2002 2003
(in thousands)

Balance Sheet Data:
Cash, cash equivalents and marketable securities $ 58,705 $ 67,256 $ 108,040
Working capital (f) 49,846 55,901 94,760
Total assets 110,488 140,124 182,556
Long-term liabilities 763 2,055 2,894
Total liabilities 29,513 39,942 53,892
Series A convertible redeemable preferred stock 148,347 93,807 95,686
Total stockholders' equity (deficit) (67,372 ) 6,375 32,978
(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)
As set forth in the table below, EBITDA is calculated by adding back allto net income the provision for income taxes and depreciation and amortization, toand subtracting from net income from operations.investment and other income. 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.

Year Ended December 31,
2001 2002 2003
(in thousands)

Net income $ 22,809 $ 25,784 $ 33,674
Provision for income taxes 14,489 16,730 21,646
Investment and other income (3,791 ) (1,775 ) (2,420 )
Depreciation and amortization 2,643 3,642 4,367
EBITDA $ 36,150 $ 44,381 $ 57,267
(c)
Reflects the purchase for $12 million of three previously leased campus facilities in January 2002.

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

indicated.

(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.

7
6

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.
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;Education (the "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 moneymonetary 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
If we fail to maintain our institutional accreditation, we would lose our ability to participate in Title IV PROGRAMS.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
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.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
7
Title IV programs at least 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
Student loan defaults could result in the loss of eligibility to participate in Title IV PROGRAMS.

Underprograms.
In general, 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, 25% or more than 25% of theirits students who were required to begin repaying their student loans in thatthe relevant fiscal year default on their payment by the end of the next federal fiscal year. In addition, an institution may lose its eligibility to participate in some or all Title IV programs if its default rate for a federal fiscal year were greater than 40%. 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 1999, 2000 1999 and 19982001 federal fiscal years, the three most recent years for which this information is available, were 4.7%5.6%, 5.6%4.7% and 12.1%4.3%, respectively. The average cohort default rates for for-profitproprietary institutions nationally, as calculated by the Department of Education, were 9.4%9.3%, 9.3%9.4% and 11.4%9.0% in fiscal years 1999, 2000 1999 and 1998,2001, respectively.
A FAILURE TO DEMONSTRATE "ADMINISTRATIVE CAPABILITY" OR "FINANCIAL
RESPONSIBILITY" MAY RESULT IN THE LOSS OF ELIGIBILITY TO PARTICIPATE IN TITLEfailure to demonstrate "administrative capability" or "financial responsibility" may result in the loss of eligibility to participate in Title IV PROGRAMS.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 or have that eligibility adversely conditioned, 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 couldwould 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
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.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 andor 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
We are dependent on the renewal and maintenance of Title IV PROGRAMS.programs.
Congress reauthorizes the Higher Education Act, which is the law governing Title IV programs, approximately every five to six years. The next Congressionalcongressional review of the Higher Education Act is scheduledcurrently expected to take placebe completed in 2003.2004. 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.
Our school would lose its eligibility to participate in federal student financial aid programs if the percentage of our revenues derived from those programs were too high.
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 2001,2002, 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.
8
Our school would lose its eligibility to participate in federal student financial aid programs if we failed to comply with the law that limits the number of correspondence and telecommunications courses that we may offer and the number of students that we may enroll in such courses.
If we offer more than 50% of our courses by correspondence or telecommunications (meeting certain regulatory conditions) or 50% or more of our students are enrolled in such courses, we could lose our eligibility to participate in federal student financial aid programs.
Our failure to comply with the Department of Education's incentive compensation rules could result in sanctions.
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.
Risks Related to Our Business
We may not be able to sustain our recent growth rate, and we may not be able to manage future growth effectively.
We have experienced a period of significant growth since 2001, particularly in our onlineStrayer University Online business. Over this period, we have opened 13 new campuses and our revenue has increased 23% between 2000 and 2003 on a compound annual basis. Our ability to sustain our current rate of growth depends on a number of factors, including our ability to obtain regulatory approvals, our ability to recruit and retain high quality academic and administrative personnel at new campuses and competitive factors. In addition, growth and expansion of our operations may place a significant strain on our resources and increased demands on our management information and reporting systems, financial management controls and personnel. 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 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.
Our strategy of opening new schools and adding new services is dependent on regulatory approvals and requires significant resources.
Establishing new schools and locations and adding new services require us to make investments in management and capital expenditures, incur marketing expenses and reallocate 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 open successfully open new schools and locations or add new programsservices in the future. Our failure to manage effectively the operations of newly established schools and locations 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.
9
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;

•
customer dissatisfaction with our services and programs;

•
performance problems with our online systems; and

•
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.
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.
Strayer University 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,service mark, 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.
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 Chairman and 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.,
Seasonal and other fluctuations in 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 debtsoperating results could adversely affect the trading price of our business.

SEASONAL AND OTHER FLUCTUATIONS IN OUR OPERATING RESULTS COULD ADVERSELY AFFECT
THE TRADING PRICE OF OUR COMMON STOCK.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
10
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 will continue to own a large percentage of our equity securities and could influence the outcome of corporate actions.
New Mountain, after giving effect to the sale of the shares offered by this prospectus, will beneficially own approximately 25.6%12.8% of our equity securities. Through its
equity ownership, voting rights contained inUnder the terms of theour Series A Preferred Stock, and representation onNew Mountain will be able to elect one member of our board of directors itand may be able to exercise
influence over the management and policiesoutcome 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 Stockother matters requiring stockholder approval. This voting concentration may have the effect of makingdelaying or preventing a change in control of our company or any other matter requiring stockholder approval.
Regulatory requirements may make it 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.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 for purposes of participation in federal student financial aid programs, a review of our accreditation by Middle States and reauthorization by certain state licensing and other regulatory 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.
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 complete 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.
Risks Related to Strayer ONLINE'sUniversity Online's Business
Strayer University Online's current success and future growth depends on the continued growth of the internet.
Strayer University 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 ONLINEUniversity 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;

•
security and privacy concerns;

o
11
•
the lack of compelling content; and

•
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.
Capacity constraints or system disruptions to Strayer University 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'sUniversity 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'sUniversity Online's computer networks. We cannot assure you that Strayer ONLINEUniversity Online will be able to expand its program infrastructure on a timely basis sufficient to meet demand for its programs. Strayer ONLINE'sUniversity 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'sUniversity 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'sUniversity Online's computer networks may be vulnerable to security risks that could disrupt operations and require it to expend significant resources.
Strayer University 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 ONLINEUniversity 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.
Strayer University 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 ONLINEUniversity 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.
Government regulations relating to the internet could increase Strayer University Online's cost of doing business, affect its ability to grow or otherwise have a material adverse effect on our business.
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.foreign countries or to the interpretation of the application of existing laws and regulations to such services. These new laws relate to or couldand interpretations may relate to issues such as online privacy, copyright, trademark and trademark,service mark, 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, regulations or regulationsinterpretations related to doing business over the internet could increase Strayer ONLINE'sUniversity Online's cost of doing business, or affect its ability to increase enrollments and revenues.revenues or otherwise have a material adverse effect on our business.
In addition, if we fail to comply with the requirements of the Higher Education Act and the Department of Education's
requirementsEducation limiting the percentage of an institution's online offerings or online students (as calculated pursuant to the applicableDepartment of Education regulations relating to the so-called 50% rule)
12

rules), we couldwould lose our eligibility to participate in the Title IV Programs whichprograms. Such a loss 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.
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 beneficially 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,12.8% 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 theyit 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.LLC. 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,"Factors" "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2003. 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;

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

•
risks associated with changes in applicable federal and state laws and regulations and accrediting agency policies;

•
competitive factors;

•
risks associated with the opening of new campuses;

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

•
risks associated with the acquisition of existing educational institutions;

•
risks related to the timing of regulatory approvals;

•
our ability to sustain our recent growth rate and to manage future growth effectively;

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

•
general economic and market conditions.
13
You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed or incorporated by reference in this prospectus under the headings "Risk Factors," "Business" and "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 theThe 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

15
Market and the dividends paid per share of common stock.
High Low Dividends
Paid
2004
First Quarter through February 25, 2004 $ 118.81 $ 104.29 —

2003
First Quarter $ 59.09 $ 49.60 $ 0.065
Second Quarter $ 80.00 $ 54.04 $ 0.065
Third Quarter $ 103.44 $ 76.26 $ 0.065
Fourth Quarter $ 112.86 $ 91.50 $ 0.065

2002
First Quarter $ 52.31 $ 42.30 $ 0.065
Second Quarter $ 66.45 $ 48.03 $ 0.065
Third Quarter $ 63.62 $ 47.10 $ 0.065
Fourth Quarter $ 62.93 $ 47.34 $ 0.065

2001
First Quarter $ 35.38 $ 23.75 $ 0.065
Second Quarter $ 50.00 $ 32.06 $ 0.065
Third Quarter $ 54.70 $ 37.20 $ 0.065
Fourth Quarter $ 51.95 $ 41.39 $ 0.06514

CAPITALIZATION
The following table sets forth our cash and ourconsolidated capitalization as of September 30, 2002December 31, 2003 and as adjusted to give effect to the offering. You should read this tablethe information set forth below 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.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
========= =========
- ----------

which are incorporated by reference into this prospectus.
As of December 31, 2003
Actual As Adjusted(1)
(in thousands)

Total liabilities $ 53,892 $ 53,892
Series A convertible redeemable preferred stock, par value $0.01 per share; 6,000,000 shares authorized; 3,899,944 and 1,132,944 shares outstanding or accrued at December 31, 2003 on an actual and as adjusted basis, respectively 95,686 28,434
Stockholders' equity:
Common stock, par value $0.01 per share; 20,000,000 shares authorized; 10,703,395 and 13,470,395 shares outstanding at December 31, 2003 on an actual and as adjusted basis, respectively 107 135
Additional paid-in-capital 59,838 127,062
Retained earnings (accumulated deficit) (26,918 ) (26,918 )
Accumulated other comprehensive income (49 ) (49 )
Total stockholders' equity 32,978 100,230
Total liabilities and stockholders' equity $ 182,556 $ 182,556
(1)
As adjusted to give effect to the conversion of 2,000,0002,767,000 shares of Series A Preferred Stock into the shares of common stock offered by this prospectusprospectus. The remaining 233,000 shares of common stock that are included in this offering are shares of common stock owned by Ron K. and including an estimated $500,000 of transaction costs.Beverly Bailey and their affiliated foundations, which MidOcean has the option to purchase under a currently exercisable option at $30.00 per share. See "Selling Stockholders" for more information.
The table set forth above is based on the number of shares of our common stock outstanding as of September 30, 2002.December 31, 2003. The total number of shares to be outstanding after this offering does not reflect:

o 970,000

o 579,405

•
334,405 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 2003.
15 2004 if our
common stock price trades above $52.00 per share for 20 consecutive
trading days.

BUSINESS

OVERVIEW
Overview
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.University Online. Strayer University prides itself on making post-secondary education accessible to working adults who missed or were previously unable to take advantage of higher 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, education and public administration at 2027 physical campuses in Pennsylvania, Maryland, Washington, D.C., Virginia, North Carolina, South Carolina and Washington, D.C.Tennessee. As of September 30,
2002,December 31, 2003, we had more than 16,50020,000 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,University 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 internalorganic 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 2027 campuses in threesix states and Washington, D.C. Our goal is to open new campuses every year with five new campuses planned for 2004 by filling out the Pennsylvania, Maryland, Washington, D.C., with
sixVirginia, North Carolina, South Carolina and Tennessee areas and by expanding into contiguous states that exhibit strong enrollment potential. We have opened 13 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 ONLINEUniversity Online in 1997, we have experienced rapid growth, with 6,82210,615 students enrolled in at least one class through Strayer ONLINEUniversity Online during the 20022003 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 aggressivea diligent program to open new campuses. As a result of these efforts, between 2000 and 2003 the rate of growth in our total revenues grew 19% last yearincreased to 23% on a compound annual basis, as our revenues increased from $78.2 million in 2000 to $92.9$147.0 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 over2003. During the same period, diluted earnings per share grew at a compound annual rate of 17%, as we continued to invest heavily 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
Industry Background and Outlook
The market for post-secondary education is large, growing and highly fragmented. Total expendituresThe U.S. Bureau of Labor Statistics reports that approximately 60 million working adults 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.United States do not have more than a high school education. 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 workers;
16
•
a projected 10%18% growth in the annual number of high school graduates from 2.8 million in 2000 to 3.13.3 million in 2010;

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

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

•
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
In addition to Strayer, there are currently seven public companies operating in the post-secondary education market in which we operate. There are also numerous smaller private companies operating in the post-secondary market.
Company Strengths
We have a 110-year112-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.

•
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 schoolcampus at additional locations throughout our network of campuses. Strayer University currently offers 3262 different degree, diploma and certificate programs, including emphases and concentrations, 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 FOCUS ON WORKING ADULTS PURSUING DEGREE PROGRAMS.

•
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. 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. In addition, we believe that our focus on associate, bachelorbachelor's 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%94% of our students were enrolled in degree programs as of September 30,
2002.

o FLEXIBLE PROGRAM OFFERINGS.for the 2003 fall term.
17
•
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.year or asynchronously through Strayer University Online. During the fall 20022003 quarter, over 85%approximately 90% of the courses we offered were night or weekend courses.courses excluding asynchronous online classes. Additionally, we developed Strayer ONLINEUniversity Online to enable students to pursue a degree entirely online, thereby increasing the convenience, accessibility and flexibility of our high quality educational content. Approximately 41%53% of our traditional
students enrolled as offor the 2003 fall 2002 quarterterm were taking or have taken at least one course through Strayer ONLINE.University 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.

•
Attractive and convenient campus locations. Our campuses are located in growing metropolitan areas in the mid-Atlantic regionand Southern regions 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.

•
Established brand name and alumni support. With a 110-year112-year operating history, Strayer University is an established brand name in post-secondary adult learning,education, and our students and graduates work throughout corporate America. Our extensive alumni network (currently over 19,70020,000 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 20022004 Book of Lists for having the second largest enrollment in graduate business and management programs in the Washington, D.C. metropolitan area.

o STRONG OWNER-ORIENTED MANAGEMENT TEAM.

•
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 Chairman and 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
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.

•
Open new campuses. Our goal is to open two to three new campuses perevery year (including two to three campuses by fall 2003)(with five planned for 2004) by filling out the Pennsylvania, Maryland, Washington, D.C., Maryland, Virginia, and North Carolina, South Carolina and Tennessee 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 twenty27 campuses while expanding into two
newseveral states. We opened three new campuses in 2001, in Baltimore, Maryland
18
and in Chesapeake and Newport News, Virginia. By the spring 2002 quarter, these three new schoolscampuses had average enrollments ahead of the growth in average student enrollments we have experienced at new schoolscampuses in the past. OnIn July 1, 2002, we began offering classes at three new campuses in North Carolina (one in Raleigh-Durham and two in Charlotte). In addition, we opened new campuses in Nashville and Memphis, Tennessee for the 2003 spring term. Due to strong demand at our Raleigh-Durham, North Carolina campus, we opened a second campus there for the 2003 summer term. We opened two new campuses in Philadelphia for the 2003 fall term. Our new campuses have typically turned profitable after five to six quarters of operation. Due to strong demand at our
Raleigh-Durham campus,
In 2004, 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 ofopened two new campuses for spring term enrollment—one in the State ofGreenville, South Carolina and one in Memphis, Tennessee, subject to reviewour second one there. In addition, two campuses are planned for Atlanta, Georgia and final
approval by the full Commission.another one in a state where we currently have a campus. We have also applied to operate in Pennsylvania and Delawareother states adjacent to our current operating region and expect to pursue approval in thesethose states and open campuses in favorable demographic locations in such states as part of our multi-year expansion plan.

o CONTINUE OUR GROWTH AT STRAYER ONLINE.
•
Expand Strayer University Online. We actively market Strayer ONLINEUniversity Online to U.S. students throughout all 50 states and to international students on a global basis. Strayer ONLINEUniversity 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 27
and online courses allows us to better serve our working adult students. Due to the convenience and flexibility of online teaching, particularly in the asynchronous or "on demand" format, this medium has rapidly grown in acceptance and is expected to continue to enjoy rapid growth. Enrollment at Strayer ONLINEUniversity 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 6,82210,615 students taking at least one online course as offor the 20022003 fall term. o DEVELOP CORPORATE/INSTITUTIONAL ALLIANCES.We intend to make additional investments in Strayer University Online to support the continued strong growth in this area.

•
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 8090 corporations and government institutions, including AT&T, Verizon,Boeing, Computer Sciences Corporation, EDS, General Motors, PEPCO, SallieMae, NorthropNorthrup Grumman, Information
Technology, EDS,Pepco, UPS, Lockheed Martin, Raytheon, the Defense Logistics
Agency, the National Guard, the DistrictU.S. Department of Columbia,Defense, the General Services Administration, the United States Navy Audit AgencyPublic Broadcasting Service and the U.S. Department of Energy. In addition, we recently established
partnerships with Alstom Power Company and the Federal ReserveWorld Bank of
Richmond.Group. We are actively working with other corporations and institutions to increase the number of such arrangements.

o CONSIDER SELECTIVE ACQUISITIONS.

•
Optimize the use of stockholders' capital. 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 locationsareas 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
19
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.process. Strayer University uses these studiesadvice from the Curriculum Advisory Board to make decisions about curriculum development, resource allocation and faculty appointments. 28
We regularly evaluate new programs and degrees to ensure that we stay current with the needs of our students and their employers. In 2004, we have plans to commence offering three new Master's degree programs in Maryland, Virginia and Washington, D.C.: Master of Education, Master of Health Services Administration and Master of Public Administration.
Strayer University offers programs in the following areas:
Graduate Programs
Undergraduate Programs
- --------------------------------------------- ---------------------------------------
o

•

• Master of Business Administration o (M.B.A.)
Degree

Master of Education (M.Ed.) Degree

Master of Health Services Administration
(M.H.S.A.) Degree

Master of Public Administration (M.P.A.) Degree

Master of Science (M.S.) Degree
Communications Technology
Information Systems
Management Information Systems
Professional Accounting

Executive Graduate Certificate Programs
Business Administration
Computer Information Systems
Professional Accounting •

•

• 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

Undergraduate Diploma Programs
Accounting
Acquisition and Contract Management
Computer Information Systems
Internetworking Technology
Network Security
Web Development

o Undergraduate Certificate Programs
Accounting
Business Administration
Computer Information Systems
Undergraduate Certificate Programs
Accounting
Business Administration
Computer Information Systems
20
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 generally 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
Strayer University Online
In August 1997, we began the operation of Strayer ONLINE.University Online. Through Strayer ONLINE,University 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 29
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 ONLINEUniversity Online or may take online courses as a supplement to traditional, site-based courses. A student taking classes through Strayer ONLINEUniversity 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 ONLINEUniversity Online courses is the same as for campus courses. During the fall 20022003 quarter, Strayer University had 6,82210,615 students participating in its online programs, 5,4018,550 of whom took classes solely through Strayer ONLINE.

FACULTYUniversity 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 approved computer-related instruction and training to keep current in information technology developments. ORGANIZATION OF STRAYER UNIVERSITYWe believe that our dedicated and capable faculty is one of the keys to our success.
21

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:

various non-management members. The current Board of Trustees members are listed below:

Dr. Peter Salins Dr. SalinsMr. Scott W. Steffey Mr. Steffey is Provostthe Chairman of the Board of Trustees and previously served for four years as Vice Chancellor for Academic Affairs
and Chief Academic Officer atof the State University of New York. Mr. Steffey is the Executive Vice President and Chief Operating Officer of Strayer.

Dr. Donald R. Stoddard

Dr. Stoddard is a lifetime academician and the former President of Strayer University.

Dr. Charlotte F. Beason

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

Mr. 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. Eliot A. Cohen

Dr. Cohen is Director of the Strategic Studies program at Johns Hopkins University. Previously, Dr. Cohen was an Assistant Professor of Government and Assistant Dean of Harvard College. Dr. Cohen has also served as a member of the Strategy Department of the United States Naval War College and as a member of the Policy Planning Staff of the Office of the Secretary of Defense.

Mr. Todd A. Milano

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

Dr. Peter Salins

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

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 J. Chris Toe

Dr. BeasonToe is the Vice Chair, Commission on Collegiate Nursing
Education and Program Director, U.S. DepartmentUniversity's President. Prior to joining Strayer in 1993, Dr. Toe was a member of Veterans
Affairs and a Director of Strayer.the economics faculty at Texas Tech University.

Mr. G. Thomas Waite, III

Mr. Waite is the Chief Financial Officer and Treasurer of The Humane Society of the United States and is also a Director of Strayer.

30
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 all academic matters, as well as by four
regional managersthree Regional Directors and the Director of Strayer University Online who are, together with the University President, responsible for implementing the Board of Trustees' overall policy and meeting commercial and budgetary goals for their respective regions.areas. In addition, there is one Dean of Student Affairs who is responsible for ensuring the University is meeting the non-academic needs of students in all regions, one Dean of Academic Development and Training and additional Regional
22

Academic Deans who oversee delivery of academic programs throughout the University's network of campuses. Other key University administration officials are the Director of Financial Aid and Title IV Compliance, Director of Libraries, Director of Facilities, Director of Academic Records, Director of Institutional Research and Assessment, Director of Business Processes and Director of Business Development. The four regionalUniversity's current senior academic and commercial managers are:are listed below:
Dr. J. Chris Toe—University President
Kristin Jones—Dean of Academic Development and Training
James F. McCoy -- McCoy—Regional Director -- Southern Virginia and Director—North Carolina, South Carolina, Tennessee and Georgia
Stan L. Petree—Regional Academic Dean—North Carolina, South Carolina, Tennessee and
Georgia
Reginald Rainey—Regional Director—Virginia
Dr. John R. Cronin—Regional Academic Dean—Virginia
Michael O. Williams -- Williams—Regional Director -- Northern VirginiaDirector—Maryland, Pennsylvania and Washington, D.C. Betty Shuford --
Keith D. Dillon—Regional Director -- Academic Dean—Maryland, Pennsylvania and Washington, D.C.
Pamela S. Bell -- Bell—Director—Strayer University Online
Betty G. Shuford—Dean of Student Affairs (all regions)
Marjorie Arrington—Director -- Strayer ONLINEof Financial Aid and Title IV Compliance
Ann P. Berger—Director of Business Development
Gregory Ferenbach—Deputy General Counsel
David A. Moulton—Director of Libraries
Randi S. Reich—Director of Business Processes
Geoffrey D. Roth—Director of Facilities
Michael K. Schuchert—Director of Institutional Research and Assessment
Cyndi L. Wastler—Director of Academic Records
23
Similarly, at the campus level, the day-to-day campusbusiness 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
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 students and alumni to encourage them to return for further education.

STUDENT PROFILE
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 20022003 fall quarter, approximately 59% were age 3031 or older and approximately 71%75% were engaged in a part-time (fewer than three courses each quarter) course of study. In the 20022003 fall quarter, our students registered for an average of 8.88.7 course credits (about two classes per student).
Strayer University has a very diverse student body. In 2001, 52%At the beginning of the 2003 fall quarter, approximately 62% of students were minorities and 56%approximately 58% of students were women. Approximately 7% of the University's students were international, including those taking courses through Strayer ONLINE.University Online. Approximately 14%3% of the University's students have a
military background, either asare 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.military personnel. 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.

31
24

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 ADMISSIONSas of the 2003 fall quarter:
Degree Programs
Number
of students Percentage of
Degree Students
Bachelors 12,203 65 %
Masters 4,107 22 %
Associates 2,541 13 %
Total Degree Students 18,851 100 %
Non-Degree Programs
Number
of students Percentage of Non-
Degree Students
Diploma 421 33 %
Undergraduate Certificate 65 5 %
Graduate Certificate 59 5 %
Undeclared 742 57 %
Total Non-Degree Students 1,287 100 %
Our business is seasonal and, as a result, our quarterly results of operations tend to vary within a year due to student enrollment patterns. Enrollment generally is highest in the fourth quarter, or fall term, and lowest in the third quarter, or summer term.
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
Tuition and Fees
Strayer charges tuition by the credit hour. All courses offered are 4.5 credit hours. As of January 1, 2002,2004, undergraduate full-time students are charged at the rate of $220.50$243.50 per credit hour. Undergraduate part-time students are charged at the rate of $231.00$255.50 per credit hour. Courses in graduate programs are charged at the rate of $294.00$324.50 per credit hour. Accordingly, a full-time student seeking to obtain a bachelor's degree in four years currently would pay approximately $9,900$11,000 per year in tuition. Strayer University implemented a tuition price increase of 5% per credit hour effective January 1, 2002.2004 which is already reflected in the above tuition rates. 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
Alternative Loan Program
Since 1995, we introduced the Strayer Education Loan Program (the "SEL
Program")University had managed a self-funded long-term student loan program for eligible students as an alternative to government sponsored
studentgovernment-sponsored loans. Education Loan Processing, Inc., a wholly-owned subsidiary, administers the SEL Programadministered this program for Strayer University.
25

In additionthe fourth quarter of 2003, we sold our loan portfolio for approximately $10 million. We believe that our students could be better served by professional lenders, and that we could avoid balance sheet risk associated with long-term lending by selling the portfolio to serving as
an alternativeestablished banking entity.
Going forward, we may continue to originate loans, which we expect to divest to various long-term lenders, but will not be in the federal loan programs, the SEL Program can service loans
at a competitive cost.

We designed the SEL Program for working adultbusiness of long-term lending to our 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 SCHOLARSHIPSFoundation 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
membernine-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
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 withsupport outcomes assessment efforts required by Middle States and state requirements to
perform outcome assessments. The 2000regulators. In 2003, 625 recent alumni survey, which had an approximately
24% overall response rate,participated in the study. Ninety-two percent (92%) reported being employed, and over two-thirds (68.1%) indicated that 91% of those responding were
employed. According to the survey,having a new job or promotion since completing their degree at Strayer University's greatest assets, in
order of importance, are campus location, schedule variety, instructor
knowledge, course selection, online courses and small class sizes.University. Strayer University students and graduates are employed by a wide range of companies and many governmental agencies.

EMPLOYEES
Employees
As of December 31, 2001,2003, Strayer University employed 486833 faculty members, of whom 116140 were full-time and 370693 were part-time, and 474690 non-faculty staff in information systems, financial aid, recruitment and admissions, payrollstudent administration, marketing and human resources, corporate accounting and other administrative functions. Of the University's non-faculty staff, 365546 were employed full-time and 109144 were employed part-time.

INTELLECTUAL PROPERTY
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,service mark, 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
forobtained federal registration of the mark.

PROPERTIES
26

Properties
We have 2027 campuses and fivesix other properties. We own six properties seven of which are owned
and 18 of which are leased.lease the others. The table set forth below lists each of our properties.

CAMPUSES OTHER PROPERTIES
-------- ----------------
Campuses
Other Properties
Alexandria, VA VA* Corporate Headquarters (Arlington, VA)
Anne Arundel County, MD Jessup, MD
Corporate Headquarters (Rosslyn, VA)
Arlington, VA Newington, VA
Regional Headquarters (Jessup, MD)
Chesapeake, VA Strayer ONLINE Regional Headquarters (Lorton, VA)
Charlotte, NC (two campuses) Washington, D.C. Library/Annex
Regional Headquarters (Charlotte, NC)
Chesterfield, VA Strayer University Online (Newington, VA)
Delaware County, PA
Fredericksburg, VA
Greenville, SC
Henrico County (Glen Allen, VA)*
Loudoun (Ashburn, VA)*
Lower Bucks, PA
Manassas, VA
VA*
Memphis, TN (two campuses)
Montgomery County (Germantown, MD)
Nashville, TN
Newport News, VA
North Raleigh, NC
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

VA*

REGULATION

REGULATORY ENVIRONMENT
*
Owned property.
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
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
27
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 thatdetermine whether 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

34
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 forto participate in federal student financial assistance.assistance programs. In 2000, Middle States reaffirmed ourStrayer University's accreditation in 2000 for a ten-year period.

The
In 2000, the accrediting agencies that accredit higher education institutions in various regions of the United States have recently adopted a "Policy Statement 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
State Education Licensure
We are authorized to offer our programs, including those offered through Strayer ONLINE,University Online, by the applicable educational regulatory agencies in all states where our campuses and Strayer ONLINEUniversity 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 foureight jurisdictions (the
District of Columbia,(Pennsylvania, Maryland, Washington, D.C., Virginia, MarylandNorth Carolina, Tennessee, South Carolina and North Carolina)Georgia) in which we currently maintain campuses or are authorized to offer educational programs, 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 appropriate state education licensure in each state where we maintain a campus that participates in Title IV programs.

OTHER APPROVALS
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 foreign countries or to the interpretation of the application of existing laws and regulations to such services. These new laws and interpretations may relate to issues such as the requirement that online education institutions be licensed as a school in one or more jurisdictions where they have no physical location. New laws, regulations or interpretations related to doing business over the internet could increase Strayer University Online's cost of doing business, affect its ability to increase enrollments and revenues or otherwise have a material adverse effect on our business.
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 JusticeHomeland Security ("DHS") to admit international foreign
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students for study in the United States subject to applicable guidelines.requirements. The INS,DHS, working with the U.S. Department of State, is in
the process of institutingrecently implemented a mandatory electronic reporting system for schools that enroll international students.

FINANCING STUDENT EDUCATIONforeign students and exchange visitors.
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 2001,2002, approximately 44% of Strayer University's students participated in one or more Title IV programs. A substantial portion (approximately 55% in 2001)2002) 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

35
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 newreturn-of-funds 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 requiredthe funds no later than 30 days after the date of the institution determinesinstitution's determination that a student withdrew. If such payments are not timely made, an institution ismay be subject to adverse action, including the submission ofbeing required to submit a letter of credit equal to 25% of the refunds the institution should have made in its most recentrecently completed fiscal year. Strayer believes that Strayer University's return-of-funds policy and practice is consistent with the current Higher Education Act.

TITLE
Title IV PROGRAMSPrograms
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.

•
Campus-Based Programs.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.

•
Federal Family Education Loans. Pursuant to the Federal Family Education Loan Program (the "FFEL Program"), which currently includes the Federal Stafford Loan ("Stafford") program, and the Federal Parent Loan for Undergraduate Students ("PLUS") program and the Federal Consolidation Loan Program, students and their parents can obtain from lending institutions
29
subsidized and unsubsidized student loans, which are guaranteed by a guaranty agency and ultimately 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
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
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

36
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 generally 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 withto six years. Congress most recently reauthorized the next CongressionalHigher Education Act in 1998. It has begun review scheduledof the Higher Education Act for purposes of reauthorization and is currently expected to take placecomplete its review in 2003.2004. 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.revisions, many of which have increased the level of scrutiny to which higher education institutions are subjected and have raised applicable standards. If Strayer University were not to continue to comply with such regulations, such non-compliance maymight 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
30

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
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
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 forthat may extend no morelonger than three years.through the end of the third complete award year (July 1—June 30) from the date of provisional certification. 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 37
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 for the institution than if it were fully certified. THIRD PARTY SERVICERSStrayer University currently is provisionally certified due to a change in ownership and control that occurred when New Mountain ceased to be a controlling stockholder of Strayer under applicable regulations (see "—Change in Ownership Resulting in a Change of Control").
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 to the Secretary of Education for any violation by the servicer of any Title IV provision. An institution must report to the Department of Education new contracts with or any significant modifications to contracts with third-party servicers as well as other matters related to third-party servicers. 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
31
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.
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 and ability to borrow and financial viability)borrow); (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, 20012002 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
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 with 30 or more borrowers entering repayment in a given federal fiscal year 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. TheFor such institutions, the Department of Education calculates a single cohort default rate for each federal fiscal year that includes in the cohort all current or former student borrowers at the institution who commencedentered repayment on any FFEL Program or Direct Loan Program loan during that year.
The Department of Education issued new regulations effective July 1, 2001 regarding cohort default rates. Under these regulations, if the Department of Education notifies an institution that its three most recent cohort default rates are each 25 percent25% 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,40%, unless the

38
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 anyeach 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 1999, 2000 1999 and 19982001 federal fiscal years, the three most
32

recent years for which this information is available, were 4.7%5.6%, 5.6%4.7% and 12.1%4.3%, respectively. The average cohort default rates for for-profitproprietary institutions nationally were 9.4%9.3%, 9.3%9.4% and 11.4%9.0% in fiscal years 1999, 2000 1999 and 1998,2001, respectively.

THE
The "90/10 RULE"Rule"
Under what is commonly referred to as the "90/10 Rule," the Higher Education Act provides that for-profitproprietary institutions of higher education, 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 Department of Education regulations. A for-profitproprietary institution that violates the "90/10 Rule" loses its eligibility to participate in Title IV programs for at least one year. During 2001,2002, Strayer University derived 55% of its revenues from tuition financed under Title IV programs.

INCENTIVE COMPENSATION
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 theThe Department of Education recently published proposedpromulgated regulations to clarify the incentive payment rule. The regulations set forth 12 "safe harbors," which describe payments or arrangements that do not violate the incentive payment rule. Failure to comply with the incentive payment rule could result in loss of ability to participate in Federal Student Financial Aidfederal 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
Distance Learning and the "50% RULES"Rules"
Strayer University offers all of its existing degree and diploma programs through Strayer ONLINE,University Online, delivering instruction via internet-based telecommunications from Strayer's Distance Learning Center in Lorton, Virginia. Strayer ONLINEUniversity Online has been approved by the applicable regulatory agencies in all states where our campuses and Strayer ONLINEUniversity Online facilities are located. During the fall 20022003 quarter, Strayer University had 6,82210,615 students taking coursesat least one online 5,401course, 8,550 of whom took classes solely through Strayer ONLINE.University Online.
The Higher Education Act generally 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 thecourses. The Secretary of Education is authorized to waive thisthe limitation on student enrollment in correspondence courses at his/her discretion in the case of institutions offering two- or four-year programs leading to an associate or bachelorbachelor's degree. Department of Education regulations grant an automatic waiver for these degree-granting institutionsof the limitation on student enrollment in correspondence courses if students enrolled in 39
the institution's correspondence courses receive five percent or less of the total Title IV program funds received by all students enrolled at the institution.institution and the institution offers two- or four-year programs leading to an associate or bachelor's degree. 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, bachelorbachelor's or graduate degree. The Higher Education Act states that, a student enrolled in a course of
instruction at an institutionwith respect to institutions like Strayer University where at least half of the programs lead to an associate, bachelor's or graduate degree, a degreestudent enrolled in a course of instruction that is offered in whole or in part through
33

telecommunications and leads to a recognized certificate for a program of study of one year or longer, or to a recognized associate, bachelorbachelor's 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 ONLINEUniversity Online will not equal or exceed one-half of the total number of courses offered by Strayer University, calculated as set forth above.in accordance with Department of Education regulations. Strayer University does not offer traditional correspondence courses.

COMPLIANCE REVIEWS
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 Programsprograms conducted by an independent certified public accountant in accordance with Government Auditing Standards and applicable audit guides of the Department of Education's Office of Inspector General audit guide.

POTENTIAL EFFECT OF REGULATORY VIOLATIONSGeneral. In addition, to enable the Secretary of Education to make a determination of financial responsibility, an institution must submit annually audited financial statements prepared in accordance with Department of Education regulations.
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 40
of eligibility of Strayer University to participate in Title IV programs, or a reduction in the amount of available federal
34

student financial aid, 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
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 regulationsMany states require approval before institutions to submit an application for an amended license in order tocan add a new programprograms 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 notteaching locations under 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.conditions. 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-profitproprietary institutions of higher education to be in full operation for two years before qualifying to participate in Title IV programs. However, the applicable regulations in many circumstances 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 generally may qualify 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 that it is not repaying in accordance with an agreement to do so, 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 to 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 at least 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 changeNew Mountain's ceasing to be a controlling stockholder of ownershipStrayer under applicable regulations (see "--Change"—Change in Ownership Resulting in a Change of Control"), and in certain other circumstances specified in the Department of Education's regulations, 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 41
approval of additional programs that lead to an associate, bachelor,bachelor's, professional or graduate degree at a level already awarded. Similarly, an institution is not required to obtain advance approval for new programs that both prepare students for gainful employment in the same or related recognized occupation as an
35

educational program that has previously been designated as an eligible program at that institution and meetsmeet certain minimum-length requirements. In the event that an institution that does not have the Department of Education's express approval for the addition of a new program erroneously determines that anthe new 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 or students 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
Change in Ownership Resulting in a Change of Control
Many states and accrediting agencies require institutions of higher education to report or obtain approval of certain changes in ownership or other aspects of institutional status, but the types of and triggers for such reporting or approval vary among states and accrediting agencies. The D.C.
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.In addition, 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 INSDHS approval to admit foreign students for U.S. study, subject to applicable regulations. In certain circumstances, DHS may require an institution to obtain approval for a change in ownership and control.
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, Tennessee and Virginia. In
36

certain circumstances, state approving agencies may require an institution to obtain approval for a change in ownership and control.
In March 2001, 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, which is a private equity fund managed by New Mountain Capital, LLC)LLC, and MidOcean (formerly known as DB Capital Investors, L.P. (an affiliate of DB Capital Partners, Inc.), the merchant
banking arm of Deutsche Bank AG) in March 2001,which is a private equity fund managed by MidOcean US Advisor, L.P., 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 INSImmigration and Naturalization Service of the U.S. Department of Justice (DHS's predecessor agency with respect to, among other matters, foreign students and exchange visitors) and state 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.
In February 2004, New Mountain transferred the Trust Shares, representing approximately 2.6% of the outstanding common stock equivalents of Strayer, to the New Mountain Strayer Trust, an irrevocable trust. The beneficiaries of the trust are all of New Mountain's partners, at the time of a distribution from the trust, who are U.S. citizens or residents for tax purposes. Before transferring the Trust Shares to the trust, New Mountain irrevocably deposited into escrow the Trust Shares and gave to the trustee an irrevocable proxy to vote the Trust Shares during the escrow period. In connection with the transfer to escrow and the associated reduction in New Mountain's ownership and control below the Department of Education 25% regulatory threshold, Strayer University was required to make a number of submissions to educational regulatory bodies, including, among others, filing an application for approval to continue to participate in federal student financial aid programs with the Department of Education. All of the applicable regulatory agencies approved the transaction. After the Department of Education and other relevant regulatory agencies approved the change in ownership and control resulting from the transfer of the Trust Shares into escrow, the escrow agent transferred the Trust Shares to the New Mountain Strayer Trust. The University's education regulators, including the Department of Education, Middle States and relevant state education agencies, either do not require or have provided approval in connection with the sale of stock by the selling stockholders contemplated by this prospectus.
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.

43
37

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS
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 ............... Name
Age Position
Directors:
Robert S. Silberman 46 Non-executive Chairman of the Board Robert S. Silberman ............. 45and Chief Executive Officer President and Director
Charles Ayres ................... 43 Director
Dr. Charlotte F. Beason ......... 54 56 Director
William E. Brock ................ 71 73 Director
David A. Coulter ................ 55 56 Director
Gary Gensler .................... 45 46 Director
Robert R. Grusky ................ 45 46 Director
Robert L. Johnson 57 Director
Steven B. Klinsky 47 Director
Todd A. Milano .................. 49 51 Director
G. Thomas Waite, III ............ 51 52 Director
J. David Wargo .................. 49 50 Director

EXECUTIVE OFFICERS:
Executive Officers:
Scott W. Steffey ................ 41 42 Executive Vice President and Chief Operating Officer
Dr. J. Chris Toe 49 University President
Mark C. Brown ................... 43 44 Senior Vice President and Chief Financial Officer
Steven A. McArthur .............. 44 46 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 65 Vice President, Human Resources, Administration and Training
Lysa A. Hlavinka 37 Vice President, Marketing
Kevin P. O'Reagan 44 Vice President and Chief Technology Officer
Sonya G. Udler ..................... 34 36 Vice President, Corporate Communications
Michael J. Fortunato 40 Controller

DIRECTORS

Directors
Mr. Steven B. Klinsky is the Founder andRobert S. Silberman 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 PresidentFebruary 2003 and Chief Executive Officer since March 2001. Mr. Silberman was an 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.2001. He also serves on the Boardboard of Directorsdirectors 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.

44
Dr. Charlotte F. Beason has been is a consultant in education and health care administration. From 1988 to 1996, Dr. Beason was Director of Health Professions Education Service and the Health
38
Professional Scholarship Program at the Department of Veterans Affairs. From 2000 to 2003, Dr. Beason was Chair and Vice Chair of the Commission on Collegiate Nursing Education (an autonomous agency accrediting baccalaureate and graduate programs in nursing); Dr. Beason is currently a member of the Accreditation Review Committee of the American Nurses Credentialing Commission. Dr. Beason is a member of the Nominating/Governance Committee of the Board and Program Director, Nursing Strategic
Healthcare Group, atalso a member of the U.S. DepartmentStrayer University Board of Veterans Affairs since 1996.

Trustees.
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 U.S. Secretary of Labor. From 1981 to 1985, Mr. Brock served as the SpecialU.S. Trade Representative. From 1977 to 1981, Mr. Brock served as Chairman of the Republican National Committee. Mr. Brock served as a U.S. Senator from the State of Tennessee from 1971 to 1981.1977. Mr. Brock is also a Director of On Assignment, Inc., HealthExtras, Inc. and Federal Medical, Inc. Mr. Brock is Chair of the Nominating/Governance Committee of the Board.
Mr. David A. Coulter has been Vice Chairman, J.P. Morgan Chase & Co. fromsince December 2000 to the present.2000. 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 Boardboard of Directorsdirectors of PG&E Corporation, and MasterCard International, and he is a TrusteeChair of Carnegie Mellon University.

the Compensation Committee of the Board.
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.

Foundation and is a member of the Board of Visitors of the University of Maryland Baltimore County and is a member of the Board of the Johns Hopkins Center for Talented Youth. Mr. Gensler also serves on the Management Advisory Board of New Mountain Capital, LLC. Mr. Gensler is Chair of the Audit Committee of the Board.
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 MergerMergers & Acquisitions Department and then in its Principal Investment Area. He is also on the Boardboard of Directorsdirectors of Surgis, Inc. and a member of the Board of Trustees of Hackley School and the Multiple Myeloma Research Foundation. Mr. Grusky is a member of the Nominating/Governance Committee of the Board.
Mr. Robert L. Johnson is the founder and Chief Executive Officer of Black Entertainment Television (BET), a subsidiary of Viacom and the leading African American-operated media and entertainment company in the United States. Mr. Johnson has held this position for more than five years. Mr. Johnson previously held positions at the Washington Urban League and the Corporation for Public Broadcasting. Mr. Johnson serves on the following boards: US Airways; Hilton Hotels Corporation; General Mills; United Negro College Fund; National Cable Television Association; and the American Film Institute. Mr. Johnson is also a member of the Board of Governors for the Rock
39

and Roll Hall of Fame in Cleveland, Ohio; and the Brookings Institute. Mr. Johnson is a member of the Compensation Committee of the Board.
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 was non-executive Chairman of the Board from March 2001 until February 2003. Mr. Klinsky is the Board's Presiding Outside Director. He also serves on the board of directors of Surgis, Inc.
Mr. Todd A. Milano has been President and Chief Executive Officer of Central Pennsylvania College since 1989. Mr. Milano is a member of the Audit Committee of the Board and is also a member of the Strayer University Board of Trustees.
Mr. G. Thomas Waite, III has been treasurerTreasurer 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. Waite is a member of the Audit Committee of the Board and is also a member of the Strayer University Board of Trustees.
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 OFFICERSMr. Wargo is a member of the Compensation Committee of the Board.
Executive Officers
Mr. Scott W. Steffey joined Strayer in March 2001 as its Executive Vice President and Chief Operating Officer 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 45
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.
Dr. J. Chris Toe is the University's President. Dr. Toe has spent 25 years in government, international business, and higher education. Eight of his 14 years in higher education have been at Strayer, which he joined in 1993. He began his career as an economist in the West African Republic of Liberia and served on the economics faculty at Texas Tech University in Lubbock, Texas for many years. Prior to becoming University President, Dr. Toe was University Provost and Academic Dean. Prior to that, he managed enrollment and student services, and graduate programs at the University. He has been a Professor and Campus Dean, and he still teaches a graduate research class.
Mr. Mark C. Brown joined Strayer in AugustSeptember 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.PricewaterhouseCoopers LLP.
Mr. 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,
40

leasing and insurance matters. Mr. McArthur previously served as Senior Vice President and General Counsel toof CalEnergy Company, Inc. and its successor, MidAmerican Energy Holdings Company, a Fortune 500 diversified holding company, and a number of its public company subsidiaries. Mr. McArthur has over 17 years'18 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
Mr. Robert E. Farmer is Vice President of Human Resources, Administration and Training of Strayer, a position to which he was appointed in 2001. Previously, Mr. Farmer was the technology fieldUniversity's Director of Operations (in 2000) and Director of Human Resources for the past 18
yearsUniversity, a position he held since 1995. Mr. Farmer was the Campus Coordinator of the University's Arlington campus from 1992 until 1995, 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 ashe was 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 coursesAdmissions at the post-graduate level as an
adjunct faculty member at The Johns Hopkins University in its Information
Technology Program.that campus from 1990 to 1992.
Ms. Lysa A. 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
Mr. Kevin P. O'Reagan has been active in the technology field for the past 18 years and joined Strayer in July 2001 as its Vice President of Human Resources, Administration and Training of the University, a position to which he was appointed in 2001.
Previously,Chief Technology Officer. Mr. Farmer was the University's Director of Operations (in 2000)O'Reagan started his career with Andersen Consulting 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 waslater joined Prudential Mortgage as the Director of AdmissionsTechnology. 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 that
campus from 1990 to 1992. Mr. Farmer is a certified Professionalthe post-graduate level as an adjunct faculty member at The Johns Hopkins University in Human
Resources (PHR).its Information Technology Program.
Ms. Sonya G. 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.

46
Mr. Michael J. Fortunato joined Strayer as its Controller in September 2002, bringing 17 years of accounting experience from a variety of industries, including healthcare, real estate, international investing and most recently software development. Mr. Fortunato is a CPA who started his career with the accounting firm of KPMG Peat Marwick.
41

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,
2002January 31, 2004 and as adjusted to reflect the sale of 2,000,0003,000,000 shares of common stock offered by the selling stockholders.stockholders, but without giving effect to the exercise of the underwriters' over-allotment option. 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%

- ----------

Shares of Common Stock Beneficially Owned Prior to the Offering Shares of Common Stock Being Offered Shares of Common Stock Beneficially Owned After the Offering
Name of Beneficial Owner
Number Percent(1) Number Number Percent(2)
New Mountain Partners, L.P. (3)(4)(5) 3,475,111 25.9 % 1,613,794 1,861,317 12.8 %
MidOcean Capital Investors, L.P. (formerly DB Capital Investors, L.P.) (5)(6) 1,087,946 9.4 % 1,000,000 87,946 0.6 %
New Mountain Strayer Trust (7) 386,206 3.5 % 386,206 0 0 The following table sets forth information with respect to the beneficial ownership by the selling stockholders of our common stock as of January 31, 2004 and as adjusted to reflect the sale of 3,450,000 shares of common stock offered by the selling stockholders, giving effect to the underwriters' over-allotment option. 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
Stock Beneficially
Owned Prior to the
Offering Shares of
Common
Stock Being
Offered Shares of Common
Stock Beneficially
Owned After the
Offering
Name of Beneficial Owner
Number Percent(1) Number Number Percent(8)
New Mountain Partners, L.P. (3)(4)(5) 3,475,111 25.9 % 1,860,848 1,614,263 10.9 %
MidOcean Capital Investors, L.P. (formerly DB Capital Investors, L.P.) (5)(6) 1,087,946 9.4 % 1,087,946 0 0
New Mountain Strayer Trust (7) 386,206 3.5 % 386,206 0 0
Robert S. Silberman 272,785 2.5 % 50,000 222,785 1.6 %
Scott W. Steffey 177,081 1.6 % 41,250 135,831 1.0 %
Mark C. Brown 61,353 0.6 % 10,417 50,936 0.4 %
Steven A. McArthur 11,743 0.1 % 8,333 3,410 0.0 %
Kevin P. O'Reagan 29,999 0.3 % 5,000 24,999 0.2 %
(1)
Based on 8,352,41210,703,395 shares of common stock outstanding as of September 30,
2002January 31, 2004 and also includes 6,003,869(a)(i) with respect to New Mountain, 2,708,111 shares of common stock issuable upon conversion of theits 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(ii) with respect to MidOcean, 854,946 shares of common stock issuable upon conversion of theits Series A Preferred Stock and (iii) with respect to the New Mountain Strayer Trust, 386,206 shares of common stock issuable upon conversion of its Series A Preferred Stock, in each case including payment-in-kind dividends accrued through January 31, 2004 and (b)(i) with respect to Robert S. Silberman, 266,666 shares of common stock issuable upon the exercise of options, (ii) with respect to Scott W. Steffey, 174,999 shares of common stock issuable upon the exercise of options, (iii) with respect to Mark C. Brown, 59,999 shares of common stock issuable upon the exercise of options, (iv) with respect to Steven A. McArthur, 8,333 shares of common stock issuable upon the exercise of options and (v) with respect to Kevin P. O'Reagan, 29,999 shares of common stock issuable upon the exercise of options.
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(2)
Based on 13,470,395 shares of common stock outstanding as of September 30, 2002,January 31, 2004 and also includes (a)(i) with respect to New Mountain, 1,094,317 shares of common stock issuable upon conversion of its Series A Preferred Stock and (ii) with respect to MidOcean, 87,946 shares of common stock issuable upon conversion of its Series A Preferred Stock, in each case after giving effect to this offering.

offering and including payment-in-kind dividends accrued through January 31, 2004.

(3) Based on a Schedule 13D/A filed with the SEC dated October 8, 2002.
Includes
Represents (a) 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 4,602,965share and (b) 2,708,111 shares of common stock issuable upon conversion of the Series A Preferred Stock (including dividends accrued through January 31, 2004) beneficially owned by New Mountain. (4)Excludes shares reported in the table as beneficially owned by MidOcean. See footnote (5). Excludes shares reported in the table as beneficially owned by New Mountain's address is 712 Fifth Avenue, 23rd Floor,Mountain Strayer Trust, as to which New York, NY
10019. Mountain disclaims beneficial ownership.

(4)
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 Directorsa director 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. The address for New Mountain, NMI and NM is 712 Fifth Avenue, 23rd Floor, New York, New York 10019.

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

(6) Based on a Schedule 13D/A filed withshares, although each disclaims beneficial ownership of the SEC dated October 9, 2002.
Includesother's shares.

(6)
Represents (a) 233,000 shares of common stock owned by Ron K. and Beverly Bailey and their affiliated foundations, which DB Capital Investors, L.P.MidOcean has the option to purchase under a currently exercisable option at $30.00 per share. Includes 1,400,903share and (b) 854,946 shares of common stock issuable upon conversion of the Series A Preferred Stock (including dividends accrued through January 31, 2004) owned by MidOcean. Ultramar Capital, Ltd., MidOcean Capital Partners, L.P., Existing Fund GP, Ltd., MidOcean Partners, LP and MidOcean Associates, SPC may all be deemed to be beneficial owners of the shares as a result of their direct or indirect control relationship with MidOcean. MidOcean Capital Partners, L.P. is the general partner of MidOcean, Existing Fund GP, Ltd. is the general partner of MidOcean Capital Partners, L.P., MidOcean Partners, LP is the sole owner of Existing Fund GP, Ltd. and MidOcean Associates, SPC is the general partner of MidOcean Partners, LP. J. Edward Virtue may be deemed the beneficial owner of the shares because he indirectly controls the securities, but disclaims beneficial ownership except to the extent of his pecuniary interest therein. The address for MidOcean, MidOcean Capital Partners, L.P., Existing Fund GP, Ltd., MidOcean Partners, LP and MidOcean Associates, SPC is 320 Park Avenue, 17th Floor, New York, New York 10022.

(7)
Represents 386,206 shares of common stock issuable upon conversion of the Series A Preferred Stock owned by DB Capital Investors, L.P.

(7) DB Capital's address isthe New Mountain Strayer Trust.

(8)
Based on 13,920,395 shares of common stock outstanding as of January 31, West 52nd Street, 26th Floor,2004 and also includes (a) with respect to 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 300,000Mountain, 847,263 shares of common stock issuable upon conversion of its Series A Preferred Stock after giving effect to cover the underwriters' over-allotment option. Assuming such option is
exercised in full, DB Capital would beneficially own 1,033,903this offering and including payment-in-kind dividends accrued through January 31, 2004 and (b)(i) with respect to Robert S. Silberman, 216,666 shares or
approximately 7.2% of our common stock, after completion(ii) with respect of this
offering.

47
Scott W. Steffey, 133,749 shares of common stock, (iii) with respect to Mark C. Brown, 50,936 shares of common stock and (iv) with respect to Kevin P. O'Reagan, 24,999 shares of common stock, in each case issuable upon the exercise of options.
43

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 8,352,41210,703,395 shares were issued and outstanding as of September 30, 2002,December 31, 2003, 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 6,003,8693,899,944 shares were issued and outstanding or accrued as of September 30, 2002.

COMMON STOCKDecember 31, 2003.
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 Boardboard of Directorsdirectors 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 STOCKAs described in more detail under "—Other Terms of Series A Preferred Stock—Corporate Governance" below, the holders of our Series A Preferred Stock have the right to elect specified percentages of our board of directors, depending on how many shares of Series A Preferred Stock are outstanding. As a result, holders of our common stock do not have the ability to vote for all members of our board of directors.
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.New Mountain and MidOcean (formerly known as DB Capital Investors, L.P.). 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 each share of Series A Preferred Stock is currently convertible into one share of 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
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 of which 3,899,944 are issued and through September 30,outstanding or accrued as of December 31, 2003. In November 2002, has accrued an additional 234,638a total of 2,300,000 shares of Series A Preferred Stock as
dividends in kind.

RANKINGwere converted into 2,300,000 shares of common stock.
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
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 Boardboard of Directors directors
44
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% of the original investment amount payable in cash when the dividend is declared and the remaining 3.5%
accumulatingrest accrued in additional shares and compounding quarterly until the Series A Preferred Stock either converts, is redeemed or a liquidation event occurs.

•
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 Boardboard of Directorsdirectors 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
Conversion at the Option of the Holder
The shares of Series A Preferred Stock are initiallycurrently 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
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 ofof:
(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 Boardboard of Directorsdirectors 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 CONTROLshares immediately prior to liquidation, dissolution or winding up.
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, as described above, 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
45

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 per share consideration to be received in the proposed transaction by the holders of common stock.

VOTING RIGHTS
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
•
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

•
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 orpari passu security;

o Any

•
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

•
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
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 yearMay 15, 2004 and until the fifth year that the Series A
Preferred Stock is outstanding,May 15, 2006, so long as the common stock is listed on the New York Stock Exchange or theThe 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 Boardboard of Directorsdirectors 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
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
•
after the tenth anniversary of the original issuance of the shares (May 15, 2011);

o Upon

•
upon a change of control of Strayer; or

o In
46
•
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
Registration Rights
Demand Registration
Strayer has agreed, pursuant to a Registration Rights Agreement dated as of May 15, 2001 with the selling stockholders,New Mountain and MidOcean, as successor to DB Capital Investors, L.P., 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 stockholdersNew Mountain and MidOcean upon their request, as follows:

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

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

o The

•
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 stockholdersNew Mountain and MidOcean 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 stockholdersNew Mountain and MidOcean is required to request the "shelf" registration.
If Strayer's Boardboard of Directorsdirectors 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,New Mountain and MidOcean, so long as the inclusion of additional securities does not reduce the amount of securities that may be sold by the selling stockholders.New Mountain and MidOcean.
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 stockholdersNew Mountain and MidOcean in accordance with the option granted to them by our former chief executive officer and majority stockholder, and any securities issued to the selling stockholdersthem in accordance with their preemptive rights.

PIGGY-BACK REGISTRATION

Strayer has granted
Piggy-Back Registration
Under the Registration Rights Agreement, the institutional selling stockholders have 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
Expenses
Except as described in the letter agreement among Strayer, New Mountain and MidOcean (see "—February 2004 Letter Agreement"), 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
47
February 2004 Letter Agreement
On February 3, 2004, we entered into a letter agreement with New Mountain and MidOcean that clarified our understanding of certain of the terms of our Series A Preferred Stock. Under the agreement, we confirmed our understanding that, in determining the number of shares of common stock issuable in connection with any conversion of the Series A Preferred Stock, dividends accrue on a daily basis up to but excluding the date of conversion. As part of the agreement, we agreed to pursue all necessary regulatory approvals that are required in connection with sales of New Mountain's and MidOcean's shares, including the shares of common stock being sold pursuant to this prospectus. New Mountain and MidOcean agreed to pay our expenses in connection with obtaining these approvals and in connection with this offering up to $850,000. Under the agreement, we have also granted, subject to customary confidentiality restrictions and restrictions on use, certain limited information rights to New Mountain, for so long as the shares constituting its original investment in Strayer that remain beneficially owned by New Mountain represent at least 5% of our common stock determined on an as-converted basis.
Indemnification
Strayer has agreed to indemnify the institutional 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 institutional selling stockholders to Strayer for use in the registration statement. Each institutional 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 institutional selling stockholders to Strayer for use in the registration statement. The amounts owed by the institutional selling stockholders under this indemnification obligation shall not exceed the proceeds the institutional selling stockholders received from the sale of securities under the registration statement.

TRANSFERABILITY OF REGISTRATION RIGHTS
Transferability of Registration Rights
The institutional selling stockholders may freely transfer the registration rights to any of their affiliates. The institutional selling stockholders may also transfer the registration rights to any other person to whom the institutional 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
Other Terms of Series A PREFERRED STOCK

CORPORATE GOVERNANCEPreferred 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 Boardboard of Directors.directors. The percentage of Strayer's Boardboard of Directorsdirectors 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 SERIESof Series A PREFERRED STOCK Preferred Stock Originally
Issued Still Outstanding
% OR NUMBER OF
ORIGINALLY ISSUED STILL OUTSTANDING DIRECTORS
----------------------------------- ---------
or Number of 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
48
So long as at least 10% of the Series A Preferred Stock originally issued remains outstanding, each committee of the Boardboard of Directors,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 Boardboard of Directors consists of sixdirectors includes four members elected by the preferred stockholders,
includingstockholders: 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%18.4% of the Series A Preferred Stock originally issued will remain outstanding (assuming no exercise of the underwriters' over-allotment option). Accordingly, the percentagenumber of members of the Boardboard of Directorsdirectors that the holders of the Series A Preferred Stock are entitled to elect will be reduced to 40%.one. As a result, in connection with this offering, Strayer has been
informed that the institutional selling stockholders expect to agreehave agreed 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 allthree of the members of Strayer's Boardthe board of Directors thatdirectors elected by the holders of the Series A Preferred Stock arewill resign from the board of directors. However, upon such resignation such directors will be reappointed to the board of directors to serve as common stock directors until the next annual stockholders meeting. New Mountain and MidOcean have agreed that New Mountain, acting alone, shall be entitled to elect.elect all of the members of the board directors entitled to be elected by New Mountain and MidOcean pursuant to the terms of the Series A Preferred Stock.
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 Boardboard of Directorsdirectors 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 Boardboard of Directorsdirectors or stockholder action that may be required, for so long as the selling stockholders own shares of Series A Preferred Stock and/or shares of common stock representing (on an as-converted basis) at least 50% of the Series A Preferred Stock originally issued to the selling stockholders, 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;

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

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

•
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;

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

•
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
Preemptive Rights
So long as the institutional selling stockholders own shares of 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 institutional selling stockholders, the institutional
49
selling stockholders have the right to purchase their pro rata portion of new equity securities that Strayer issues, other than certain exempt issuances.

OPTIONS
Options
As of September 30, 2002,December 31, 2003, there were 970,0001,131,667 shares of our common stock issuable upon exercise of outstanding stock options, of which 293,333options to purchase 506,662 shares are exercisable and 676,667options to purchase 625,005 shares are currently not exercisable, and 579,405334,405 shares of our common stock reserved for future issuance under our existing stock option plan. The outstanding options have a weighted average life of six4.4 years and a weighted average exercise price of $37.09$41.05 per share.

AUTHORIZED BUT UNISSUED CAPITAL STOCK
Nasdaq Shareholder Approval Rules
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.
Authorized But Unissued Capital Stock
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
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 Boardboard of Directorsdirectors and may discourage or make more difficult any attempt by a person or group to obtain control of Strayer.

VOTING REQUIREMENTS
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 Boardboard of Directors.

SPECIAL MEETINGSdirectors.
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
50
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

•
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

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

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

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

•
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

•
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

•
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
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
Transfer Agent And Registrar
The transfer agent and registrar for the common stock is American Stock Transfer & Trust Company.

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

54
51

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,LLC, Banc of America Securities LLC, andJ.P. Morgan Securities Inc., Legg Mason Wood Walker, Incorporated, Lehman Brothers Inc. and Thomas Weisel Partners LLC are acting as representatives, the following respective numbers of shares of common stock:

NUMBER
OF SHARES
UNDERWRITER ---------
Underwriter
Number of Shares
Credit Suisse First Boston Corporation ........................
LLC
Banc of America Securities LLC ................................
J.P. Morgan Securities Inc.
Legg Mason Wood Walker, Incorporated .......................... ---------

Lehman Brothers Inc.
Thomas Weisel Partners LLC
Total ........................................................ 2,000,000
=========
3,000,000
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
The selling stockholders (other than the Trust) have granted to the underwriters a 30-day option to purchase on
a pro rata basis up to 300,000450,000 additional shares of common stock at the initial public offering price less the underwriting discounts and commissions. The optionoptions may be exercised only to cover any over-allotments of common stock. See "Selling Stockholders" for additional information.
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 initial 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:

pay. New Mountain and MidOcean have agreed to reimburse certain of our expenses in connection with this offering.

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

Per Share Total
Allotment
Without
Over-
allotment With
Over-
allotment Without
Over-
allotment With
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,LLC, 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
52

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 directors and certain of our executive officers as well as New Mountain and directors and
the selling stockholdersMidOcean 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

55
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,LLC, for a period of 90 days after the date of this prospectus.prospectus; except that the executive officers may dispose of common stock or other securities acquired in connection with any intra-fund transaction or reallocation pursuant to the terms of any of our employee benefit plans, acquired in connection with the exercise of any outstanding option to acquire our common stock or our other securities that expires during this 90-day period, following the termination of the executive officer's employment with us or pursuant to the terms of the underwriting agreement.
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.
J.P. Morgan Securities Inc., one of the underwriters, may be deemed to be our affiliate. The offering therefore is being conducted in accordance with the applicable provisions of Rule 2720 of the National Association of Securities Deals, Inc. Conduct Rules. David A. Coulter, a director of Strayer, is a Vice Chairman of J.P. Morgan Chase & Co. J.P. Morgan Chase & Co. is the parent of one of the underwriters, J.P. Morgan Securities Inc.
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 theThe 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-makingmarket 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.

•
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.

•
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
53
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 -- option—a naked short position -- 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.

•
In passive market-making,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 theThe Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.

56
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.offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. 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
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
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;

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

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

RIGHTS OF ACTION -- ONTARIO PURCHASERS ONLY
54
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 shares of 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 shares of 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 shares of 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 shares of 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 shares of 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
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

57
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
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,Hogan & Hartson L.L.P., Baltimore, Maryland. Certain legal matters in connection with the offering will be passed upon for us by Willkie Farr & Gallagher LLP, New York, New York. The underwriters are represented by Mayer, Brown, Rowe & Maw LLP, 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 by reference to the Annual Report on Form 10-K for the year ended December 31, 2003 have been so includedincorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.
55

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 2003.

•
Our Current ReportsReport 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 2004.

•
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 or Item 12 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.

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 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)

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 the Company to
take certain actions, including:

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
56

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.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.

ITEMfee and the NASD fee. New Mountain and MidOcean have agreed to reimburse us for certain expenses incurred in connection with this offering.
SEC registration fee $ 49,259
NASD Fee $ 30,500
Printing fees $ 25,000
Legal fees and expenses $ 250,000
Accounting fees and expenses $ 75,000
Miscellaneous fees and expenses $ 70,241
Total $ 500,000
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.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, under identified circumstances, the underwriters agree to indemnify the registrant and each officer, director and controlling person of the registrant against certain liabilities.
II-1

ITEM

Item 16. EXHIBIT INDEX.

Exhibit Index.

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
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
Hogan & Hartson L.L.P.
23.1* Consent of PricewaterhouseCoopers LLP
23.2* Consent of Venable, Baetjer and Howard, LLPHogan & Hartson L.L.P. (included in their opinion filed as Exhibit 5.1)
24.1+
24.1† Power of Attorney (included on the signature pages)

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

*
Filed herewith.

†
Previously filed.

ITEM

Item 17. UNDERTAKINGS.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.

•
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.

•
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.

•
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 of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of 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 CityCounty of Arlington, State of Virginia, on the 1st25th day of November, 2002.

STRAYER EDUCATION, INC.

By: /s/ Robert S. Silberman
---------------------------------
Name: Robert S. Silberman
Title: February, 2004.
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 1st25th day of November, 2002.

February, 2004.

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

* Signature
Title

/s/ ROBERT S. SILBERMAN
Robert S. Silberman

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

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

/s/

/s/ MARK C. BROWN
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

* Director
----------------------------------

William E. Brock

Director

* Director
----------------------------------

David A. Coulter

II-3

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

Director

* Director
----------------------------------

Gary Gensler

Director

* Director
----------------------------------

Robert R. Grusky

Director

*
Robert L. Johnson

Director
----------------------------------

II-3

*
Steven B. Klinsky

Director

*
Todd A. Milano

Director

* Director
----------------------------------

G. Thomas Waite, III

Director

* Director
----------------------------------

J. David Wargo

Director

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

By:

/s/ STEVEN A. MCARTHUR
Steven A. McArthur
Attorney-in-Fact

II-4

QuickLinks
TABLE OF CONTENTS
PROSPECTUS SUMMARY
Company Summary
Industry Background And Outlook
Company Strengths
Company Strategy
2001 Recapitalization
General
The Offering
Summary Consolidated Financial And Other Data
RISK FACTORS
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
PRICE RANGE OF COMMON STOCK
CAPITALIZATION
BUSINESS
MANAGEMENT
SELLING STOCKHOLDERS
DESCRIPTION OF CAPITAL STOCK
UNDERWRITING
NOTICE TO CANADIAN RESIDENTS
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Item 15. Indemnification of Directors and Officers.
Item 16. Exhibit Index.
Item 17. Undertakings.
SIGNATURES

Maryland	(703) 247-2500	52-1975978 ~~(State~~

(State or Other Jurisdiction of ~~(Primary Standard Industrial (I.R.S. Employer~~ Incorporation or Organization) ~~Classification Code Number)~~	(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)	(I.R.S. Employer Identification No.) ~~- -----------------------------------------------------------------------------------------~~

Title of each class of securities to be registered	Amount to be registered (1)	Proposed maximum offering price per share (2)	Proposed maximum aggregate offering price(1)(2)	Amount of registration fee


Common stock, par value $.01 per share	3,450,000 shares	$112.69	$388,780,500	$49,259 (3)

		Page
PROSPECTUS SUMMARY ~~....................................................~~		1
RISK FACTORS ~~.......................................................... 8~~		7
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS ~~......................................... 14~~		13
USE OF PROCEEDS ~~....................................................... 15 DIVIDEND POLICY ....................................................... 15~~		14
PRICE RANGE OF COMMON STOCK ~~...........................................~~		14
CAPITALIZATION		15 ~~CAPITALIZATION ........................................................~~
BUSINESS		16 SELECTED HISTORICAL FINANCIAL AND OTHER INFORMATION .................................................. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......................................... 19 BUSINESS .............................................................. 25
MANAGEMENT ~~............................................................ 44~~		38

SELLING STOCKHOLDERS ~~.................................................. 47~~		42
DESCRIPTION OF CAPITAL STOCK ~~.......................................... 48~~		44
UNDERWRITING ~~.......................................................... 55~~		52
NOTICE TO CANADIAN RESIDENTS ~~.......................................... 57~~		54
LEGAL MATTERS ~~......................................................... 58~~		55
EXPERTS ~~............................................................... 58~~		55
WHERE YOU CAN FIND MORE INFORMATION ~~........................................................ 58~~		56
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ~~............................................. 59 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ......................................................... F-1~~		56

Issuer ~~.............................~~		Strayer Education, Inc.
Common stock offered by the selling stockholders ~~..................... 2,000,000~~		3,000,000 shares
Common stock to be outstanding after this offering ~~.................... 10,352,412~~		13,470,395 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