SECURITIESAND EXCHANGE COMMISSION

WASHINGTON, D.C.20549

FORM 10-K

ANNUAL REPORTPURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF1934

For the fiscal year endedDecember  31,  2006

Commission filenumber: 0-21039

STRAYER EDUCATION,INC.

(Exact name of registrant asspecified in itscharter)

|                                                             |  |  |                                        |
|-------------------------------------------------------------|--|--|----------------------------------------|
| MARYLAND                                                    |  |  | 52-1975978                             |
| (Stateor other jurisdiction ofincorporation ororganization) |  |  | (I.R.S. Employer IdentificationNumber) |
|                                                             |

1100 Wilson Boulevard, Suite 2500,Arlington, VA 22209(Address of principal executiveoffices)

REGISTRANT’S TELEPHONE NUMBER INCLUDING AREACODE: (703) 247-2500

SECURITIES REGISTERED PURSUANT TO SECTION12(b) OF THEACT:

|                             |  |  |                                           |
|-----------------------------|--|--|-------------------------------------------|
| COMMONSTOCK, $.01 PAR VALUE |  |  | THE NASDAQ STOCK MARKETLLC                |
| (Titleof class)             |  |  | (Name of each exchange onwhichregistered) |
|                             |

SECURITIES REGISTERED PURSUANT TOSECTION 12(g) OF THE ACT:NONE

(Title ofClass)

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct: [X] Yes [    ] No

Indicate by checkmark if the registrant is not required to file reports pursuant toSection 13 or Section 15(d) of the Act: [    ] Yes[X] No

Indicate by check mark whether the Registrant(1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe last 90 days. [X] Yes [    ] No

Indicate by check mark if disclosure of delinquent filers pursuantto Item 405 of Regulation S-K (Section 229.405 of this chapter) is notcontained herein, and will not be contained, to the best ofRegistrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. [X]

Indicate by checkmark whether the Registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of‘‘accelerated filer’’ and‘‘large accelerated filer’’ in Rule 12b-2of the Exchange Act:

[X] Largeaccelerated filer        [    ] Acceleratedfiler        [    ] Non-accelerated filer

Indicate by check mark whether the Registrant is a shell company (asdefined in Rule 12b-2 of the Securities Exchange Act).[    ] Yes [ X] No

The aggregate marketvalue of the voting and non-voting common stock held by non-affiliates(computed by reference to the price at which the common stock was lastsold) as of June  30,  2006, the last business day of theRegistrant’s most recently completed second fiscal quarter, wasapproximately $1.4  billion.

The total number of shares ofcommon stock outstanding as of January  31,  2007 was14,293,584.

DOCUMENTS INCORPORATED BY REFERENCE

Certainportions of the Registrant’s Definitive Proxy Statement for its2007 Annual Meeting of Stockholders (which is expected to be filed withthe Commission within 120 days after the end of the Registrant’s2006 fiscal year) are incorporated by reference into Part III of thisReport.

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STRAYEREDUCATION, INC.

FORM 10-K

INDEX

|                |  |  |                                                                                                                  |  |        |      |  |        |  |
|----------------|--|--|------------------------------------------------------------------------------------------------------------------|--|--------|------|--|--------|--|
|           |  |  |                                                                                                             |  |        | Page |
| PART I         |  |  |                                                                                                             |  |        |      |  |   |  |
| Item1          |  |  | Business                                                                                                         |  |        |      |  | 2      |  |
| Item 1A        |  |  | Risk Factors                                                                                                     |  |        |      |  | 24     |  |
| Item 1B        |  |  | Unresolved StaffComments                                                                                         |  |        |      |  | 30     |  |
| Item2          |  |  | Properties                                                                                                       |  |        |      |  | 30     |  |
| Item3          |  |  | Legal Proceedings                                                                                                |  |        |      |  | 30     |  |
| Item4          |  |  | Submission of Matters to a Vote of Security Holders.                                                             |  |        |      |  | 30     |  |
| PARTII         |  |  |                                                                                                             |  |        |      |  |   |  |
| Item 5         |  |  | Market for Registrant’s Common Equity, Related StockholderMatters and Issuer Purchases of EquitySecurities |  |        |      |  | 31     |  |
| Item6          |  |  | Selected FinancialData                                                                                           |  |        |      |  | 34     |  |
| Item7          |  |  | Management’s Discussion and Analysis of FinancialCondition and Results ofOperations                        |  |        |      |  | 36     |  |
| Item7A         |  |  | Quantitative and Qualitative Disclosures about MarketRisk                                                        |  |        |      |  | 42     |  |
| Item 8         |  |  | FinancialStatements and SupplementaryData                                                                        |  |        |      |  | 43     |  |
| Item 9         |  |  | Changes in andDisagreements With Accountants on Accounting and FinancialDisclosure                               |  |        |      |  | 64     |  |
| Item9A         |  |  | Controls and Procedures                                                                                          |  |        |      |  | 64     |  |
| Item 9B        |  |  | OtherInformation                                                                                                 |  |        |      |  | 65     |  |
| PARTIII        |  |  |                                                                                                             |  |        |      |  |   |  |
| Item10         |  |  | Directors and Executive Officers of the Registrant                                                               |  |        |      |  | 66     |  |
| Item 11        |  |  | ExecutiveCompensation                                                                                            |  |        |      |  | 71     |  |
| Item12         |  |  | Security Ownership of Certain Beneficial Owners andManagement                                                    |  |        |      |  | 71     |  |
| Item13         |  |  | Certain Relationships and Related Transactions                                                                   |  |        |      |  | 71     |  |
| Item 14        |  |  | Principal AccountingFees and Services                                                                            |  |        |      |  | 71     |  |
| PARTIV         |  |  |                                                                                                             |  |        |      |  |   |  |
| Item15         |  |  | Exhibits and Financial StatementSchedules                                                                        |  |        |      |  | 72     |  |
| SIGNATURES     |  |  |                                                                                                                  |  | 73     |      |
| CERTIFICATIONS |  |  |                                                                                                                  |  |   |      |
|                |

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PARTI

CAUTIONARY NOTICE REGARDING FORWARD-LOOKINGSTATEMENTS:

This document and the documents incorporated byreference herein include ‘‘forward-lookingstatements,’’ within the meaning of Section 27A of theSecurities Act of 1933, as amended (the ‘‘SecuritiesAct’’), and Section 21E of the Securities Exchange Act of1934, as amended (the ‘‘Exchange Act’’),including, in particular, the statements about our plans, strategiesand prospects under the headings ‘‘Management’sDiscussion and Analysis of Financial Condition and Results ofOperations’’ and‘‘Business.’’ We have typically used thewords ‘‘may,’’‘‘will,’’‘‘expect,’’‘‘believe,’’‘‘estimate,’’‘‘plan,’’‘‘intend’’ and similar expressions in thisdocument and the documents incorporated by reference herein to identifyforward-looking statements. We have based these forward-lookingstatements on our current views with respect to future events andfinancial performance. Actual results could differ materially fromthose projected in the forward-looking statements. Theseforward-looking statements are subject to many risks, uncertainties andassumptions, including, among other things:

|  |              |                                          |
|--|--------------|------------------------------------------|
|  | •  | the pace of growth of studentenrollment; |

|  |              |                                                                                                                                                                               |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | our continued compliancewith Title IV of the Higher Education Act and the regulationsthereunder, as well as state regulatory requirements and accreditingagency requirements; |

|  |              |                                                    |
|--|--------------|----------------------------------------------------|
|  | •  | risks related tothe timing of regulatoryapprovals; |

|  |              |                     |
|--|--------------|---------------------|
|  | •  | competitivefactors; |

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|--|--------------|-----------------------------------------------------------------|
|  | •  | our ability to continue toimplement our online growth strategy; |

|  |              |                                                   |
|--|--------------|---------------------------------------------------|
|  | •  | risks associated with the opening of newcampuses; |

|  |              |                                                                                                     |
|--|--------------|-----------------------------------------------------------------------------------------------------|
|  | •  | risks associated with theoffering of new educational programs and adapting to other programchanges; |

|  |              |                                                                               |
|--|--------------|-------------------------------------------------------------------------------|
|  | •  | risks associated with theacquisition of existing educational institutions;and |

|  |              |                                        |
|--|--------------|----------------------------------------|
|  | •  | general economic and marketconditions. |

You should not put undue reliance on anyforward-looking statements. You should understand that many importantfactors, including those discussed under the headings‘‘Management’s Discussion and Analysis ofFinancial Condition and Results of Operations’’ and‘‘Business,’’ could cause our results todiffer materially from those expressed or suggested in anyforward-looking statements. Further information about these and otherrelevant risks and uncertainties may be found in Item 1A below andelsewhere in this Annual Report on Form 10-K and in our other filingswith the Securities and Exchange Commission. We undertake no obligationto update or revise forward-looking statements.

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Item1.    Business

Overview

Our company is afor-profit post-secondary education services corporation. Our missionis to make high quality, post-secondary education achievable andconvenient for working adults in today’s economy. We work tofulfill this mission by offering a variety of academic programs throughour wholly-owned subsidiary Strayer University, Inc., both intraditional classroom courses and through Strayer University Online.Strayer University prides itself on making post-secondary educationaccessible to working adults who were previously unable to takeadvantage of higher education opportunities.

Founded in 1892,Strayer University is an institution of higher learning that offersundergraduate and graduate degree programs in business administration,accounting, information technology, education, and publicadministration at 47 physical campuses in Pennsylvania, Delaware,Maryland, Washington, D.C., Virginia, North Carolina, South Carolina,Georgia, Tennessee, Florida, Alabama and Kentucky. As ofDecember  31,  2006, we had more than 31,000 studentsenrolled in our programs. Strayer University is accredited by theMiddle States Commission on Higher Education (‘‘MiddleStates’’), one of the six regional collegiate accreditingagencies recognized by the U.S. Secretary of Education. As part of itsprogram offering, the University also offers classes via the Internetthrough Strayer University Online, providing its working adult studentsa flexible and convenient program offering over the Internet. StrayerUniversity Online attracts students from around the country andthroughout the world.

Over the last several years, we haveexperienced significant organic growth, expanding geographically byopening new campuses. Since our initial public offering in 1996, wehave grown from eight campuses in one state and Washington, D.C., to 47campuses in 11 states and Washington, D.C. Our goal is to serve thedemand for adult education by opening new campuses in the promisingareas in those states in which we currently operate physical campuses,and by expanding into contiguous states that exhibit strong demand foradult education in business and information technology programs. Wehave opened 33 of our campuses since the beginning of 2001 andcurrently plan to open eight campuses in 2007, including four alreadyopened. We have also developed a robust online education program. Sincereceiving regulatory approval to offer our degree programs throughStrayer University Online in 1997, our online programs have experiencedrapid growth, with over 21,000 students enrolled in at least one classthrough Strayer University Online during the 2006 fall term.

Inconnection with our recapitalization in May  2001, we hired a newsenior management team, made significant investments in informationtechnology infrastructure to support planned growth in our onlineprograms, and embarked on a long term program to open new campuses inareas where there is a strong demand for adult education. As a resultof these efforts, between 2000 and 2006 our revenues grew 22% ona compound annual basis, as our revenues increased from $78.2million in 2000 to $263.6  million in 2006. During the sameperiod, diluted earnings per share grew at a compound annual rate of17% (including the impact of stock-based compensation which webegan recording in 2006), as we continued to invest heavily in ourvarious initiatives to serve working adult students. For moreinformation relating to our revenues, profits and total assets, pleaserefer to ‘‘Management’s Discussion and Analysis ofFinancial Condition and Results of Operations’’ and ourconsolidated financial statements included elsewhere in this AnnualReport on Form 10-K.

Industry Background andOutlook

The market for post-secondary education is large,growing and highly fragmented. The U.S. Bureau of Labor Statistics hasreported that approximately 61  million working adults in theUnited States do not have more than a high school education andapproximately 32  million people have some college experience butno degree. We believe that the demand for career-oriented,post-secondary education will continue to increase during the nextseveral years as a result of demographic, economic and social trends,including:

|  |              |                                                                         |
|--|--------------|-------------------------------------------------------------------------|
|  | •  | an increase in demand byemployers for professional and skilled workers; |

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|  |              |                                                                                                                       |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------|
|  | •  | a projected18% growth in the annual number of high school graduates from2.8  million in 2000 to 3.3  million in 2010; |

|  |              |                                                                                            |
|--|--------------|--------------------------------------------------------------------------------------------|
|  | •  | the significant and measurable incomepremium attributable to post-secondary education; and |

|  |              |                                                                |
|--|--------------|----------------------------------------------------------------|
|  | •  | budgetary constraints at traditionalcolleges and universities. |

The adult education market is asignificant and growing component of the post-secondary educationmarket. We believe that the market for post-secondary adult educationshould continue to increase as working adults seek additional educationand training to update and improve their skills in order to enhancetheir earnings potential and to keep pace with the increasing demandsof a knowledge-based economy. In addition, we believe that many workingadults will seek regionally accredited degree programs that provideflexibility to accommodate the fixed schedules and time commitmentsassociated with their professional, family and personalobligations.

In addition to Strayer, there are currently severalhundred not-for-profit universities, several public companies andnumerous smaller private companies operating in the post-secondaryeducation market in which we operate.

CompanyStrengths

We have a 115-year operating history and a trackrecord of providing practical and convenient education programs forworking adults. We believe the following strengths position us tocapitalize on the growing demand for post-secondary education amongworking adults:

|  |              |                                                                                                                                                                                                                                                                          |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Consistentoperating history.    We have been in continuous operationsince 1892 and have demonstrated an ability to operate consistently andgrow profitably. Our enrollment and revenue have grown each year sinceour initial public offering in1996. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Practical and diversifiedcurricula.    We offer core curricula in stable, high-demandareas of adult education. In order to keep pace with a changingknowledge-based economy, we constantly strive to meet the evolvingneeds of our working adult students and their employers by regularlyrefining and updating our existing educational programs. Additionally,we replicate programs that are successful in a given campus atadditional locations throughout our network of campuses. StrayerUniversity currently offers 85 different degree, diploma andcertificate programs, including emphases and concentrations, to itsstudents. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Focus on working adultspursuing degree programs.    We focus on helping workingadults pursue college degrees in order to advance their career andemployment opportunities. We believe this is an attractive marketwithin the post-secondary education sector due to the growing number ofadult students enrolling in post-secondary education programs and thehighly motivated nature of adult students. We consider adult studentsto be our primary customers, with the various business and governmentorganizations that provide tuition assistance to their employees as oursecondary customers. In addition, we believe that the structure of ourcurriculum, featuring associate, bachelor’s and graduate-leveldegree programs, encourages students to continue their education andresults in extended periods of student enrollment which positivelyimpacts the visibility and predictability of our future revenues.Approximately 93% of our students were enrolled in degreeprograms for the 2006 fall term. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Flexible programofferings.    We maintain flexible quarterly programs thatallow working adult students to attend classes and complete courseworkon a convenient evening and weekend schedule throughout the calendaryear. Additionally, we developed Strayer University Online to enablestudents to pursue a degree partially or entirely online, therebyincreasing the convenience, accessibility and flexibility of oureducational programs. Approximately 69% of our students enrolledfor the 2006 fall term were taking at least one course through StrayerUniversity Online. We believe that these flexible offerings distinguishus from many traditional universities that currently do not effectivelyaddress the special requirements of working adults. |

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|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Attractive andconvenient campus locations.    Our campuses are located ingrowing metropolitan areas in the Mid-Atlantic and Southern regionswhere there are large populations of working adults with demographiccharacteristics similar to those of our typical students. StrayerUniversity’s campuses are attractive and modern, offeringconducive learning environments in convenient locations. |

|  |              |                                                                                                                                                                                                                                                                                                                                    |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Established brand name and alumnisupport.    With a 115-year operating history, StrayerUniversity is an established brand name in post-secondary adulteducation, and our students and graduates work throughout corporateAmerica. Our alumni network fosters additional recruitmentopportunities for students. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Strongowner-oriented management team.    In connection with ourrecapitalization in 2001, we developed a new growth strategy and hireda new senior management team to implement this strategy. As describedbelow, under the leadership of Robert S. Silberman, our Chairman andChief Executive Officer, we embarked on various initiatives to servethe working adult market by expanding our campuses and developing anonline learning platform. In addition, all of our senior officers havemade investments in Strayer through outright share purchases, inaddition to any compensatory stock awards. |

CompanyStrategy

Our goal is to be a leading, nationwide provider ofhigh quality post-secondary education programs for working adultsprimarily in the areas of business administration, accounting andinformation technology. We have identified the following factors as keyto executing our growth strategy:

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Maintain stable enrollment in ourmature markets.    We have 25 mature campuses (those inoperation for more than three years) out of a total number of 47campuses (including two new campuses opened for the 2007 winter term inLouisville and Lexington, Kentucky and two new campuses opened for the2007 spring term in Orlando, Florida). Over the last five years,average enrollment at our mature campuses has remained stable, whiletuition has increased approximately 5% per year. Our goal is tomaintain stable campus enrollments in our mature markets, whileincreasing revenues by continuing market-based tuition increases. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Open new campuses.    Our goalis to open new campuses every year by filling out the promising areasin those states in which we currently operate physical campuses and byexpanding into contiguous states that exhibit strong demand for adulteducation in business and information technology programs. We believethis strategy will leverage our existing investment in curriculum,management and marketing infrastructure. Since our initial publicoffering in 1996, we have grown from eight campuses to 47 campuseswhile expanding into 11  states and Washington, D.C. The Companyhas opened 33 new campuses since the beginning of 2001. These campusesare set forth in the table below: |

New CampusesOpened(since the beginning of2001)

2001

Baltimore,Maryland (Owings Mills Campus)Norfolk, Virginia (ChesapeakeCampus)Norfolk, Virginia (Newport NewsCampus)

2002

Charlotte, NorthCarolina (North Charlotte Campus)Charlotte, North Carolina (SouthCharlotte Campus)Raleigh-Durham, North Carolina (CaryCampus)

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2003

Memphis,Tennessee (Thousand Oaks Campus)Nashville, TennesseeRaleigh-Durham, North Carolina (North Raleigh Campus)Philadelphia,Pennsylvania (Lower Bucks Campus)Philadelphia, Pennsylvania(Delaware CountyCampus)

2004

Greenville, SouthCarolina Memphis, Tennessee (Shelby Oaks Campus)Atlanta,Georgia (Cobb County Campus)Atlanta, Georgia (ChambleeCampus)Philadelphia, Pennsylvania (King of PrussiaCampus)

2005

Tampa, Florida(Tampa East Campus)Tampa, Florida (Tampa WestCampus)Greensboro, North CarolinaColumbia, SouthCarolinaAtlanta, Georgia (MorrowCampus)

2006

Wilmington,DelawarePhiladelphia, Pennsylvania (Center CityCampus)Pittsburgh, Pennsylvania (Penn Center WestCampus)Pittsburgh, Pennsylvania (Cranberry WoodsCampus)Norfolk, Virginia (Virginia Beach Campus)Atlanta,Georgia (Roswell Campus)Charleston, South CarolinaBirmingham,Alabama

2007

Louisville,KentuckyLexington, KentuckyOrlando, Florida (MaitlandCampus)Orlando, Florida (Orlando East Campus)

In2007, we plan to open a total of eight new campuses. Two of the plannednew campuses were opened in Lexington and Louisville, Kentucky for the2007 winter term. Another two campuses have been opened in Orlando,Florida for the 2007 spring term. The locations of the remaining fourcampuses planned for this year will be announced after all necessaryregulatory approvals are obtained.

We continue to applyto operate in other states adjacent to our current operating region andexpect to pursue approvals in those states and open campuses infavorable demographic locations in such states as part of ourmulti-year expansion plan, with our ultimate goal to become anationwide university.

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | ExpandStrayer University Online.    We actively market StrayerUniversity Online to U.S. students throughout all 50 states and tointernational students on a global basis. Strayer University Online hasdemonstrated its success with both asynchronous (‘‘ondemand’’) and synchronous (‘‘realtime’’) course offerings that are favored by workingadult students because of their quality and convenience. We believethat the added flexibility of being able to offer both traditional andonline courses allows us to better serve our working adult students.Due to the convenience and flexibility of online teaching, particularlyin the |

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|  |        |                                                                                                                                                                                                                                                                                                                                     |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |   | asynchronous format, this medium has rapidlygrown in acceptance and is expected to continue to enjoy rapid growth.There were over 21,000 students taking at least one online course forthe 2006 fall term. We intend to make additional investments in StrayerUniversity Online to support the continued strong growth in thisarea. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Developcorporate/institutional alliances.    We believe we are wellpositioned to pursue significant opportunities in the largecorporate/institutional market. Our convenient evening, weekend andonline courses provide an attractive solution for the education andtraining needs of employers and their employees. We currently haveemployer agreements or billing arrangements of various types with manycorporations and government organizations, including Bank of America,FedEx Inc., Lockheed Martin, Northrop Grumman, SAIC, Sodexho USA, UPS,United States Postal Service, Verizon, Verizon Wireless and Wachovia.We are actively working with other corporations and institutions toincrease the number of such arrangements and to further developexisting relationships. These relationships, once established, providean ongoing source of new and continuing students obtained at lowermarketing costs. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Optimize the useof stockholders’ capital.    We compare all uses of ourcapital (including but not limited to organic growth investments,acquisitions, share repurchases and dividends) in terms of return onour owners’ capital and enhancing shareholder value. In 2006, werepurchased shares of our common stock and increased our common stockdividend. We periodically evaluate opportunities to acquire otherproviders of post-secondary education. We have no current commitmentswith regard to potential acquisitions. |

StrayerUniversity

Curriculum

Strayer University offersinformation technology and business-oriented curricula to equipstudents with specialized and practical knowledge and skills forcareers in business, industry and government. Our Academic CurriculumCommittee regularly reviews and revises the University’s courseofferings to improve the educational programs and respond tocompetitive changes in job markets. In 1993, Strayer University formeda Curriculum Advisory Board. The composition of the Curriculum AdvisoryBoard varies over time, but typically consists of Strayer Universityfaculty and representatives from private and government employers.Strayer University uses advice from the Curriculum Advisory Board tomake decisions about curriculum development, resource allocation andfaculty appointments. We regularly evaluate new programs and degrees toensure that we stay current with the needs of our students and theiremployers.

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Strayer University offers programsin the following areas:

|                                                                                                                                                                                                                                                                                                                                            |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| GraduatePrograms                                                                                                                                                                                                                                                                                                                           |  |  | UndergraduatePrograms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| •    Masterof Business Administration (M.B.A.)       Degree                                                                                                                                                                                                                    |  |  | •    Bachelor of Science(B.S.) Degree           Accounting           Information Systems           (withmultiple concentrations)*           Economics           InternationalBusiness                                                                                                                                                                                                                                                                |
| •    Masterof Education (M.Ed.)Degree                                                                                                                                                                                                                                                                             |
| •    Masterof Health Services Administration        (M.H.S.A.)Degree                                                                                                                                                                                                           |
| •    Masterof Public Administration (M.P.A.)       Degree                                                                                                                                                                                                                      |  |  | •    Bachelor of BusinessAdministration       (B.B.A.)Degree                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| •    Masterof Science (M.S.) Degree           InformationSystems           (with multipleconcentrations)                                                                                            |  |  | •    Associate in Arts (A.A.)Degree            Accounting           Acquisition and Contract Management           BusinessAdministration           InformationSystems           (with multipleconcentrations)           Economics           GeneralStudies            Marketing |
| •    Executive GraduateCertificate Programs           Business Administration           InformationSystems           Professional Accounting |  |  | •    DiplomaPrograms           Accounting           Acquisition and Contract Management           Information Systems           (withmultiple concentrations)                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                        |  |  | •    Undergraduate Certificate Programs           Accounting            BusinessAdministration           InformationSystems                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                            |

|  |
|--|
|  |  |
|  |

|   |                                                                                                                                                                                                                                                                                                                                                                           |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * | In2006, Strayer University redesigned its Information Systems programs,aligning the curriculum under one standard program with multipleconcentrations. In doing so, Strayer University expanded its offeringsto new concentrations including Computer Security, Database Developer,Homeland Security and Information Systems, Security Administration andWeb Development. |

Each undergraduate degree program includescourses in oral and written communication skills as well as mathematicsand various disciplines in the humanities and social sciences. Inaddition to our degree, diploma and certificate programs, we offerclasses to non-degree and non-program students wishing to take coursesfor personal or professional enrichment.

Although all of ourprograms are generally offered at each campus, the University adaptsits course offerings to the demands of the student population at eachlocation. Strayer University students may enroll in courses at morethan one campus and take courses online.

Strayer Universitystructures its curricula to allow students to advance sequentially fromone learning level to another by applying credits earned in one programtoward attainment of a more advanced degree. For example, a studentoriginally pursuing a diploma in computer information systems canextend his or her original educational objective by taking additionalcourses leading to an associate’s degree in computer informationsystems, a bachelor’s degree in computer information systems,and ultimately a master’s degree in computer informationsystems. This curriculum design provides students a level of competencyand a measure of attainment in the event they interrupt their educationor choose to work in their field of concentration prior to obtainingtheir final degree.

Strayer University Online

InAugust  1997, we began operating Strayer University Online.Through Strayer University Online, the University offers courses anddegree programs via the Internet using both synchronous 

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(‘‘real time’’)and asynchronous (‘‘on demand’’) approachesto online learning. The asynchronous format was first introduced by theUniversity in the summer 2001 quarter and has grown rapidly due toincreasing demand. Students may take all of their courses solelythrough Strayer University Online or may take online courses as asupplement to traditional, site-based courses. A student taking classesthrough Strayer University Online has the same admission and financialaid requirements, policies and procedures and receives the same studentservices as other Strayer University students. Tuition for StrayerUniversity Online courses is the same as for campus courses. During thefall 2006 quarter, Strayer University had over 21,000 studentsparticipating in its online programs, approximately 18,000 of whom tookclasses solely through Strayer University Online.

Faculty

Strayer University seeks to appoint faculty who holdappropriate academic credentials, are dedicated, active professionalsin their field and are enthusiastic and committed to teaching workingadults. In accordance with our educational mission, the Universityfaculty focuses its efforts on teaching. The normal course load for afull-time faculty member is four courses per quarter for each of threequarters, or 12 courses per academic year. Strayer University requiresfull-time faculty members to provide eight hours per week of studentacademic counseling and other student support services.

Weprovide financial support for faculty members seeking to update theirskills and knowledge. Strayer University maintains a tuition plan thattypically reimburses instructors enrolled in advanced degree programsfor 75% of the tuition for one new course per term when taken atinstitutions other than Strayer. Full-time faculty (and all otheremployees) receive a 90% discount for all Strayer courses. TheUniversity also conducts annual in-house faculty workshops in eachdiscipline. We believe that our dedicated and capable faculty is one ofthe keys to our success.

Organization of StrayerUniversity

The University’s annual financial budget andoverall academic and business decisions are directed by its Board ofTrustees. The Board of Trustees consists of Dr.  CharlotteF.  Beason,  Chairwoman of the Board of Trustees, and nineother members. The University By-Laws prescribe that a majority ofvoting members be unaffiliated with either University management orStrayer Education, Inc. to assure independent oversight of all academicprograms and services consistent with Middle States requirements. Withthe exception of the University President, all of our trustees areindependent, non-management members. The current Board of Trusteesmembers are listed below:

Board ofTrustees

|                          |  |                                                                                                                                                                                                                                                                                                                                |
|--------------------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Dr.  CharlotteF.  Beason |  | Dr.  Beason is the Chairwoman of theBoard of Trustees. She has served as a member of the Board of Trusteessince 1996. She has extensive experience in education, distancelearning, and the accreditation of education programs. (See Directorsand Executive Officers in Item 10 below for additional biographicalinformation.) |
|                          |  |                                                                                                                                                                                                                                                                                                                                |

|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Mr.  Daniel  R.Abbasi |  | Mr.  Abbasi has served as a member of theBoard of Trustees since 2005. He is Director of Mission Point CapitalPartners, a private equity firm specializing in clean energy.Previously, Mr.  Abbasi was Associate Dean of the Yale School ofForestry and Environmental Studies, where he remains affiliated as anadvisor. In addition, he has also held management positions withKaplan, Inc., Etrana, Inc., Time Warner, the U.S. EnvironmentalProtection Agency and the Stanford Center on International Conflict andNegotiation. Mr.  Abbasi holds a bachelor’s degree ingovernment and an MBA, both from Harvard University. Mr.  Abbasialso holds a master’s degree in political science from StanfordUniversity. |
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

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|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Mr.  Dennis  H.Blumer |  | Mr.  Blumer was elected to the Board ofTrustees in 2007. He served as Vice President and General Counsel ofThe George Washington University in Washington, D.C., from 1995 untilhis retirement in 2007. He has more than 40 years of experience inhigher education including previously serving as Executive Assistant tothe President of the University of Maryland, College Park and in asimilar capacity at the University of Wisconsin. Mr.  Blumerholds a bachelor’s degree in history and a juris doctoratedegree from Yale University. |
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

|                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Mr.  RolandCarey |  | Mr.  Carey has served as a member of the Boardof Trustees since 1990. He served for 23 years as a U.S. Army Officerin the specialties of Air Defense Missile Evaluation and MilitaryEducation. He retired in 1986 as a Lieutenant Colonel. Mr.  Careyserved 11 years as a mathematics instructor and as an InterventionProgram Coordinator with Fairfax County Public Schools. Mr.Carey holds a bachelor’s degree in mathematics from FloridaA&M University and a master’s degree in educationalleadership from George Mason University. |
|                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

|                     |  |                                                                                                                                                                                                                                                                                                                                                |
|---------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Mr.Todd  A.  Milano |  | Mr.  Milano has servedas a member of the Board of Trustees since 1992 and has more than 30years of experience in post-secondary education. Since 1989, he hasserved as President of Central Pennsylvania College near Harrisburg,Pennsylvania. (See Directors and Executive Officers in Item 10 belowfor additional biographical information.) |
|                     |  |                                                                                                                                                                                                                                                                                                                                                |

|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                              |
|------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Dr. William C.Reha, MD |  | Dr.  Reha was elected to the Board ofTrustees in 2007. He is a Board certified urologist and surgeonaffiliated with Potomac Hospital in Woodbridge, Virginia. Dr.Reha is active in Strayer University alumni affairs and is the 2005Outstanding Alumni Award winner. He holds a bachelor’s degree inbiochemistry from Binghamton University, an M.D. from New York MedicalCollege, and an MBA from Strayer University. |
|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                              |

|                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|----------------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Dr.Peter  D.  Salins |  | Dr.  Salins has servedas a member of the Board of Trustees since 2002. Having served asProvost and Vice Chancellor for Academic Affairs of the StateUniversity of New York (SUNY) system from 1997 to 2006, he is currentlyUniversity Professor of Political Science at SUNY’s Stony BrookUniversity.  Dr. Salins also serves on the Boards of theResearch Foundation of SUNY, the Lavanburg Foundation, and the CitizensHousing and Planning Council of New York. Dr.  Salins holds abachelor’s degree in architecture and a doctorate in regionalplanning, both from Syracuse University. |
|                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Dr.Donald  R.  Stoddard* |  | Dr.  Stoddard hasserved as a member of the Board of Trustees since 1996. He served asPresident of Strayer University from 1997 to 2002. His backgroundincludes university teaching, higher education administration, and aFulbright Lectureship in Romania. Dr.  Stoddard holds abachelor’s degree in business administration and amaster’s degree in English, both from Northeastern University.He also holds a doctorate in English from the University ofPennsylvania. |
|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

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|                    |  |                                                                                                                                                                                                                          |
|--------------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Dr.  J.  ChrisToe* |  | Dr.  Toe has served as a member of the Board ofTrustees since 2003. He served as President of Strayer University from2003 to April  2006. Dr.  Toe now serves as the Minister ofAgriculture for the Republic of Liberia. |
|                    |  |                                                                                                                                                                                                                          |

|                          |  |                                                                                                                                                                                                                                                                  |
|--------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Mr.G.  Thomas Waite, III |  | Mr. Waite has been a member ofthe Board of Trustees since 1996. Mr.  Waite is the Treasurer andChief Financial Officer of the Humane Society of the United States.(See Directors and Executive Officers in Item 10 below for additionalbiographicalinformation.) |
|                          |  |                                                                                                                                                                                                                                                                  |

|  |
|--|
|  |  |  |
|  |

|   |                  |
|---|------------------|
| * | non-votingmember |

Within the academic, strategic and financialparameters set by the Board of Trustees, the University is managed on adaily basis by the University President. The President is charged withthe responsibility of overseeing the implementation of the policiesestablished by the Board of Trustees and is supported in this functionby senior administrative officers, including the Provost. The majorityof the University’s operations are centralized within thePresident’s office or the University’s senioradministrative staff offices, such as faculty development, curriculumdevelopment, library administration, student records, student affairs,accounting and auditing, human resources, operations, marketing, publicrelations, facilities, information technology, and regulatorycompliance, including oversight of the University’sparticipation in federal financial aid programs.

Within thiscentralized structure is a division of responsibilities into two broadcategories: academics and business operations. For the academicfunctions, the President is supported by the Provost and oversees agroup of senior administrative deans including the Dean of StudentAffairs, the Director of Libraries, and the Dean of InstitutionalResearch and Assessment. The President is also responsible for thegeneral curriculum, University policies, as well as many regulatorycompliance matters and student affairs. The Provost is responsible forimplementing academic policies and programs of the University,including the supervision of the Academic Deans, Director of Programsand the Dean of Academic Development and Training.

On thebusiness operations side, the President works closely with the chiefoperating officer, who is responsible for ensuring that campus andonline operations meet the annual University budget and financial goalsestablished by the Board of Trustees. These duties include thesupervision of four Regional Directors (who in turn are responsible forbusiness operations at campuses within their regions of responsibility)and addressing issues associated with the physical plant at eachfacility (e.g. HVAC, campus security, etc.). Other senioradministrative officers also support the President in areas such aslegal compliance, accounting and auditing, computer technology,insurance and human resources.

University SeniorManagement

Dr.  Joel  O.Nwagbaraocha   –   Interim University President,Provost, and Chief Academic Officer

Randi S.Reich   –    Senior Vice President – AcademicAdministration

PatriciaArdoline-Pellicci   –   Vice President –Operations

Daniel W. Jackson   –   VicePresident – Operations

James F.McCoy   –   Vice President –Operations

Reginald Rainey   –   VicePresident – Operations

Biographical information regardingthe above senior members of University management is set forth in Item10 below.

Similarly, at the campus level, the day-to-day businessoperations are managed by a Campus Director and the academic functionsare overseen by a Campus Dean. Each campus is staffed with

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personnel performing instructional,admissions, academic advising, financial aid, student services andcareer development functions. A learning resource center at each campussupports the University’s instructional programs. Each learningresource center contains a library and computer laboratories and isoperated by a full-time manager and support staff who assist studentsin the use of research resources.

Strayer Education, Inc.Executive Officers

For a description of Strayer Education,Inc.’s senior management, see the biographical information setforth in Item 10 below.

Marketing

To generate interestamong potential students, we engage in a broad range of activities toinform the working adult public and their employers about the programswe offer. These activities include direct mail, Internet marketing,marketing to our existing students and graduates, print and broadcastadvertising, student referrals, and corporate and government outreachactivities. Direct response methods (direct mail and Internetadvertising) are used to generate inquiries from potential students.Strayer University maintains booths and information tables atappropriate conferences and expos, as well as at transfer days atcommunity 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 humanresource departments and on-site information meetings. We implement acontinuous marketing strategy to record inquiries in our database andtrack them through to application and registration. Additionally, wemarket information about new programs and new locations to students andalumni to encourage them to return for further education.

Student Profile

The majority of Strayer University studentsare working adults completing their first college degree to improvetheir job skills and advance their careers. Of the students enrolled inStrayer University’s programs at the beginning of the 2006 fallquarter, approximately 63% were age 31 or older andapproximately 78% were engaged in part-time study (fewer thanthree courses each quarter). In the 2006 fall quarter, our studentsregistered for an average of 8.3 course credits (about two classes perstudent).

Strayer University has a very diverse studentpopulation. At the beginning of the 2006 fall quarter, approximately65% of students were minorities and approximately 64% ofstudents were women. Approximately 6% of the University’sstudents were international, including those taking courses throughStrayer University Online. Approximately 4% of theUniversity’s students are active duty military personnel.Strayer University prides itself on making post-secondary educationaccessible to working adults who missed or were previously unable totake advantage of educational opportunities.

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The following is a breakdown of ourstudents by program level as of the 2006 fall quarter:

|                          |  |  |                   |  |        |                            |  |  |                           |  |     |  |
|--------------------------|--|--|-------------------|--|--------|----------------------------|--|--|---------------------------|--|-----|--|
| Program                  |  |  | Number ofstudents |  |        | Percentageof totalstudents |
| Bachelor’s         |  |  |                   |  | 17,172 |                            |  |  |                           |  | 55  |  |
| Master’s           |  |  |                   |  | 8,310  |                            |  |  |                           |  | 27  |  |
| Associate                |  |  |                   |  | 3,593  |                            |  |  |                           |  | 11  |  |
| TotalDegree              |  |  |                   |  | 29,075 |                            |  |  |                           |  | 93  |  |
| Diploma                  |  |  |                   |  | 317    |                            |  |  |                           |  | 1   |  |
| UndergraduateCertificate |  |  |                   |  | 157    |                            |  |  |     * |
| GraduateCertificate      |  |  |                   |  | 152    |                            |  |  |     * |
| Undeclared               |  |  |                   |  | 1,671  |                            |  |  |                           |  | 5   |  |
| TotalNon-Degree          |  |  |                   |  | 2,297  |                            |  |  |                           |  | 7   |  |
| TotalStudents            |  |  |                   |  | 31,372 |                            |  |  |                           |  | 100 |  |
|                          |

|  |
|--|
|  |  |  |
|  |

|   |                         |
|---|-------------------------|
| * | Representsless than 1%. |

Our business is seasonal and as aresult, our quarterly results of operations tend to vary within a yeardue to student enrollment patterns. Enrollment generally is highest inthe fourth quarter, or fall term, and lowest in the third quarter, orsummer term.

Student Admissions

Students attendingStrayer University’s undergraduate programs must possess a highschool diploma or a General Educational Development (GED) Certificate.Students attending Strayer University’s graduate programs musthave a bachelor’s degree from an accredited institution and meetcertain other requirements. If a student’s undergraduate majorvaries widely from the student’s proposed graduate course ofstudy, certain undergraduate prerequisite courses may also be necessaryfor admission.

International students applying for admissionmust meet the same admission requirements as other students. Thosestudents whose native language is not English must provide evidencethat they are able to use the English language with sufficient facilityto perform college-level work in an English-speaking institution.

Tuition and Fees

Strayer charges tuition by the course. Eachcourse is 4.5 credit hours. As of January  1,  2007,undergraduate full-time students are charged $1,280 per course.Undergraduate part-time students are charged $1,355 per course. Coursesin graduate programs are charged at the rate of $1,730 per course.Accordingly, a full-time student seeking to obtain a bachelor’sdegree in four years currently would pay approximately $13,000 per yearin tuition. Strayer University implemented a tuition price increase ofapproximately 5% per course effective January  1,2007, which is reflected in the above tuition rates. Under a variety ofdifferent programs, Strayer University offers scholarships and tuitiondiscounts to active duty military students and in connection withvarious corporate and government sponsorship and tuition reimbursementarrangements.

Alternative Loan Program

The Company is nolonger in the business of long-term lending to its students. From 1995to 2003, Strayer University managed a self-funded, long-term studentloan program for eligible students as an alternative to governmentsponsored loans. Education Loan Processing, Inc., a wholly-ownedsubsidiary, administered this program for Strayer University. In thefourth quarter of 2003, the Company sold its student loan portfolio forapproximately $10  million. The Company believed that itsstudents could be better served by professional lenders, and that theCompany could avoid balance sheet risk associated with long-termlending by selling its portfolio to an established banking entity.

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During 2004 and 2005, the Company originatedloans which it immediately divested to a long-term lender. Now, almostall of the new private loans utilized by its students are obtaineddirectly by the students from third party lenders without beingoriginated by the Company.

Career DevelopmentServices

Although most of Strayer University’s studentsare adults who are already employed, the University actively assistsits students and alumni with job placement and other career-relatedmatters through career development offices in each region where theUniversity has campuses. Strayer’s career development personnelconduct workshops on employment-related topics (including resumepreparation, interviewing techniques and job search strategies),maintain job listings, arrange campus interviews by employers andprovide other placement assistance. Strayer University sponsors careerfairs in the fall and spring quarters for students and alumni todiscuss career opportunities with companies and governmentalagencies.

We regularly conduct alumni surveys to monitor thecareer progression of our graduates and to support outcomes assessmentefforts required by Middle States and state regulators.

Employees

As of December  31,  2006, StrayerUniversity employed 1,067 faculty members, of whom 141 were full-timeand 926 were part-time. Full-time faculty members teach on average 4-5courses per quarter compared to adjunct faculty who normally teach onecourse per quarter. The University also employed 1,110 non-facultystaff in information systems, financial aid, recruitment andadmissions, student administration, marketing and human resources,corporate accounting and other administrative functions. Of theUniversity’s non-faculty staff, 956 were employed full-time and154 were employed part-time.

Intellectual Property

In theordinary course of its business, Strayer develops many kinds ofintellectual property that are or will be the subject of copyright,trademark, service mark, patent, trade secret or other protections.Such intellectual property includes Strayer’s coursewarematerials for classes taught via the Internet or otherdistance-learning means and business know-how and internal processesand procedures developed to respond to the requirements of itsoperations and various education regulatory agencies. Strayer alsoclaims a common law right to the mark‘‘STRAYER’’ for educational services andhas obtained federal registration of the mark.

Regulation

Regulatory Environment

The Higher Education Act of 1965, as amended (the‘‘Higher Education Act’’), and theregulations promulgated thereunder require all higher educationinstitutions that participate in the various financial aid programsunder Title IV of the Higher Education Act (‘‘Title IVprograms’’), including Strayer University, both to complywith detailed substantive and reporting requirements and to undergoperiodic regulatory scrutiny. The Higher Education Act mandatesspecific regulatory responsibility for each of the following componentsof the higher education regulatory triad: (1) the federal governmentthrough the U.S. Department of Education (‘‘Department ofEducation’’); (2) the institutional accrediting agenciesrecognized by the U.S. Secretary of Education(‘‘Secretary of Education’’) and (3) stateeducation regulatory bodies. The regulations, standards and policies ofthese regulatory agencies are subject to change.

Accreditation 

Strayer University has beeninstitutionally accredited since 1981 by Middle States, a regionalaccrediting agency recognized by the U.S. Secretary of Education withrespect to the accreditation of 

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institutions in its region and distanceeducation programs offered by those institutions. Accreditation is asystem for recognizing educational institutions and their programs forperformance, integrity, educational quality, faculty, physicalresources, administrative capability and financial stability thatentitles them to the confidence of the educational community and thepublic. In the United States, this recognition comes primarily throughprivate voluntary associations of institutions and programs of highereducation. These associations establish criteria for accreditation,conduct peer-review evaluations of institutions and professionalprograms for accreditation and publicly designate those institutionsthat meet their criteria. Accredited schools are subject to periodicreview by accrediting bodies to determine whether such schools maintainthe performance, integrity and quality required for accreditation.

As with all its regulatory relationships, Strayer University strivesto maintain close contact with, and provide frequent status updates toMiddle States. This regular contact keeps Middle States informed of theUniversity’s planned activities and ensures that theUniversity’s performance continues to meet Middle States’expectations. To this end, Strayer University is committed toperiodically evaluating its own performance and submitting self-studyreports to Middle States and making any necessary improvements tocontinue meeting Middle States’ accreditation standards as theUniversity grows and expands geographically. If an institution’sperformance were ever not to meet its accrediting agency’s (orother regulator’s) expectations or failed to meet applicablestandards, then its operations could be conditioned, or severelyconstrained or even curtailed, depending on the severity of thenon-compliance. Accordingly, Strayer University endeavors toproactively keep Middle States (and all of its other regulators) fullyinformed and satisfied with its performance and thereby strives tomaintain good regulatory relationships as a key Universitypriority.

Middle States is the same accrediting agency thatgrants institutional accreditation to other degree-granting public andprivate colleges and universities in its region (including Delaware,Washington, D.C., Maryland, New Jersey, New York, Pennsylvania, PuertoRico and U.S. Virgin Islands) and distance education programs offeredby those institutions. Accreditation by Middle States is an importantattribute of Strayer University. Colleges and universities depend onaccreditation in evaluating transfers of credit and applications tograduate schools. Employers rely on the accredited status ofinstitutions when evaluating a candidate’s credentials, andstudents and corporate and government sponsors under tuitionreimbursement programs look to accreditation for assurance that aninstitution maintains quality educational standards. Moreover,institutional accreditation is necessary to qualify for eligibility toparticipate in federal student financial assistance programs.

Strayer University is accredited by Middle States through 2011. In2006, Strayer University completed a voluntary comprehensive self studyreport, which was submitted to Middle States to support StrayerUniversity’s request for early reaffirmation of accreditationprior to Middle States’ scheduled accreditation review in 2011.The Company’s objective is to provide a high qualitypost-secondary education to working adult students, and participationin academic peer review processes is an important way to help meet thatobjective.

Middle States reviewed Strayer University’sreport and on November  16,  2006, requested additionalinformation on the implementation of three proposed improvements:changes to Strayer University’s bylaws to address best practicesin governance in higher education, hiring of additional full-timefaculty, and testing procedures to assess core competencies of incomingstudents. Strayer University will file a follow up report with MiddleStates by March  1,  2007 to confirm implementation of theactions the University has taken. Strayer University’s status asan accredited institution remains unchanged as a result of MiddleStates’ review, and Strayer University anticipates it willreceive early re-accreditation approval by June  2007.

InNovember  2006, Middle States also approved theUniversity’s two new campuses in Kentucky, which opened for the2007 winter term, as well as two new campuses in the Orlando, Floridamarket that the University opened for the 2007 spring term. All ofStrayer University’s new campus locations require Middle Statesapproval, and Middle States has indicated that it will review theremainder of the University’s planned 2007 openings followingsuccessful completion of the reaffirmation process.

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In 2000, the agencies that accredithigher education institutions in various regions of the United Statesadopted a ‘‘Policy Statement on Evaluation ofInstitutions Operating Interregionally.’’ Under thatpolicy, both the ‘‘home’’ regionalaccreditor and the ‘‘host’’ regionalaccreditor cooperate to evaluate an institution that delivers educationat a physical site in the host accreditor’s region. Although thehome region is solely responsible for final accreditation actions, aswe open campuses in regions outside Middle States’ region, thehost regional accreditors may elect to participate in the accreditationprocess of such expansion operations.

StateEducation Licensure 

We are authorized to offer ourprograms, including those offered through Strayer University Online, bythe applicable educational regulatory agencies in all states where ourcampuses and Strayer University Online facilities are located. We aredependent upon the authorization of each state where we are physicallylocated to allow us to operate and to grant degrees or diplomas tostudents in those states. We are subject to extensive regulation ineach of the 12 jurisdictions (Pennsylvania, Delaware, Maryland,Washington, D.C., Virginia, North Carolina, South Carolina, Tennessee,Georgia, Kentucky, Alabama and Florida) in which we currently maintainor are authorized to maintain campuses and in which we are authorizedto offer educational programs, and we will be subject to similarextensive regulation in those additional states in which we may expandour operations in the future. State laws and regulations affect ouroperations and may limit our ability to introduce educational programsor establish new campuses. We are required by the Higher Education Actto maintain appropriate state education licensure in each state wherewe maintain a campus that participates in Title IV programs.

Theincreasing popularity and use of the Internet and other online servicesfor the delivery of education has led and may lead to the adoption ofnew laws and regulatory practices in the United States or foreigncountries or to the interpretation of the application of existing lawsand regulations to such services. These new laws and interpretationsmay relate to issues such as the requirement that online educationinstitutions be licensed as a school in one or more jurisdictions wherethey have no physical location. New laws, regulations, orinterpretations related to doing business over the Internet couldincrease Strayer University Online’s cost of doing business,affect its ability to increase enrollments and revenues, or otherwisehave a material adverse effect on ourbusiness.

Other Approvals 

We areapproved by appropriate authorities for the education of veterans andmembers of the selective reserve and their dependents, as well as forthe rehabilitation of handicapped veterans. In addition, we areauthorized by the U.S. Department of Homeland Security to admit foreignstudents for study in the United States subject to applicablerequirements. The U.S. Department of Homeland Security, working withthe U.S. Department of State, has implemented a mandatory electronicreporting system for schools that enroll foreign students and exchangevisitors.

Financing Student Education

Students finance their Strayer University education in avariety of ways. A significant number of students utilize federalfinancial aid. In the 2006 fall term, approximately 57% ofStrayer University’s students participated in one or more TitleIV programs, the same as in the 2005 fall term. In addition, many ofour working adult students finance their own education or receive fullor partial tuition reimbursement from their employers. Congress hasenacted several tax credits for students pursuing higher education andhas provided for a tax deduction for interest on student loans andexclusions from income of certain tuition reimbursement amounts.

Our financial aid programs are designed to assist eligible studentswhose financial resources are inadequate to meet the cost of education.Aid is awarded on the basis of financial need, generally defined underthe Higher Education Act as the difference between the cost ofattending a program of study and the amount a student reasonably can beexpected to contribute to those expenses. All recipients of financialaid must maintain a satisfactory grade point average and progress in atimely manner toward completion of a program of study.

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The 1998 amendments to the HigherEducation Act that took effect on October  7,  2000,address an institution’s return-of-funds policy with regard toTitle IV programs. The Higher Education Reconciliation Act of 2005,which amended the Higher Education Act and generally took effect onJuly  1,  2006, also addresses return-of-funds to Title IVprograms. Under the Higher Education Act’s return-of-fundsprovision, the institution must first determine the amount of Title IVprogram funds that the student ‘‘earned.’’If the student withdraws during the first 60% of any period ofenrollment or payment period, the amount of Title IV program funds thatthe student earned is equal to a pro rata portion of the funds forwhich the student would otherwise be eligible. If the student withdrawsafter the 60% point, then the student has earned 100% ofthe Title IV program funds. The institution must return to theappropriate Title IV programs, in a specified order and excluding theFederal Work-Study Program and certain other federal financialassistance programs, the lesser of the unearned Title IV program fundsor the institutional charges incurred by the student for the periodmultiplied by the percentage of unearned Title IV program funds. Aninstitution must return the funds no later than 45 days after the dateof the institution’s determination that a student withdrew. Ifsuch payments are not timely made, an institution may be subject toadverse action, including being required to submit a letter of creditequal to 25% of the refunds the institution should have made inits most recently completed fiscal year. In July  2006, theUniversity issued the Department of Education an unsecured letter ofcredit in the amount of $938,000, which expires in July  2007, inconnection with this regulation.

Title IVPrograms

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

|  |              |                                                                                                                                                                                                       |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Federal Pell Grants.    Grantsunder the Federal Pell Grant (‘‘Pell’’)program are available to eligible students based on financial need andother factors. |

|  |              |                                                                                                                                                                                                                                                                                            |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Campus-BasedPrograms.    The ‘‘campus-based’’Title IV programs include the Federal Supplemental EducationalOpportunity Grant program, the Federal Work-Study program and theFederal Perkins Loan (‘‘Perkins’’)program. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Federal Family EducationLoans.    Pursuant to the Federal Family Education Loan Program(the ‘‘FFEL Program’’), which currentlyincludes the Federal Stafford Loan(‘‘Stafford’’) program, the Federal ParentLoan for Undergraduate Students (‘‘PLUS’’)program (which beginning on July  1,  2006 provides formaking loans to graduate and professional students as well as toparents of dependent undergraduate students), and the FederalConsolidation Loan Program, students and their parents can obtain fromlending institutions subsidized and unsubsidized student loans, whichare guaranteed by a guaranty agency and ultimately by the federalgovernment. Students who demonstrate financial need may qualify for asubsidized Stafford loan. With a subsidized Stafford loan, the federalgovernment will pay the interest on the loan while the student is inschool and during any approved periods of deferment, until thestudent’s obligation to repay the loan begins. UnsubsidizedStafford loans are available to students who do not qualify for asubsidized Stafford loan or, in some cases, in addition to a subsidizedStafford loan. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                      |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Federal DirectStudent Loans.    Under the William D. Ford Federal Direct LoanProgram (the ‘‘Direct Loan Program’’), theDepartment of Education makes loans directly to students rather thanguaranteeing loans made by lending institutions. Strayer University hasnot originated any loans under this program, but utilizes other TitleIV loan programs. |

Other Financial Aid Programs

Eligible students at Strayer University may alsoparticipate in educational assistance programs administered by the U.S.Department of Veterans Affairs, the U.S. Department of Defense, theDistrict of Columbia, the State of Pennsylvania, and privateorganizations.

Financial AidRegulation

To be eligible to participate in Title IVprograms, Strayer University must comply with specific standards andprocedures set forth in the Higher Education Act and the regulationsissued thereunder 

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by the Department of Education. Aninstitution must, among other things, be authorized by each statewithin which it is physically located to offer its educational programsand maintain institutional accreditation by a recognized accreditingagency. The institution also must be certified by the Department ofEducation to participate in Title IV programs, based on a determinationthat, among other things, the institution meets certain standards ofadministrative capability and financial responsibility. For purposes ofthe Title IV programs, Strayer University and all of its campuses areconsidered to be a single ‘‘institution of highereducation’’ so that Department of Education requirementsapplicable to an ‘‘institution of highereducation’’ are generally applied to all of StrayerUniversity’s campuses in the aggregate rather than on anindividual basis. Strayer University and each of its campuses arecurrently certified to participate in Title IV programs.

Congress reauthorizes the Higher Education Act approximately everyfive to six years. Congress most recently comprehensively reauthorizedthe Higher Education Act in 1998. On February  8,  2006,President Bush signed the Deficit Reduction Act of 2005 which includesthe Higher Education Reconciliation Act of 2005. Among other measures,the Higher Education Reconciliation Act reauthorizes the HigherEducation Act with respect to the federal guaranteed student loanprogram. On September  30,  2006, President Bush signed theThird Higher Education Extension Act to extend to June30,  2007 the other programs authorized by the Higher EducationAct. Congress is expected to consider reauthorization of those programsin 2007. In addition, Congress reviews and determines appropriationsfor Title IV programs on an annual basis. An elimination of certainTitle IV programs, a reduction in federal funding levels of suchprograms, material changes in the requirements for participation insuch programs, or the substitution of materially different programscould reduce the ability of certain students to finance theireducation. This, in turn, could lead to lower enrollments at StrayerUniversity or require Strayer University to increase its reliance uponalternative sources of student financial aid. Given the significantpercentage of Strayer University’s revenues that are derivedindirectly from the Title IV programs, the loss of or a significantreduction in Title IV program funds available to StrayerUniversity’s students could have a material adverse effect onStrayer.

The regulations applicable to Strayer University havebeen subject to frequent revisions, many of which have increased thelevel of scrutiny to which higher education institutions are subjectedand have raised applicable standards. If Strayer University were not tocontinue to comply with such regulations, such non-compliance mightaffect the operations of the University and its ability to participatein Title IV programs. Certain elements of the regulations applicable toStrayer University are described below.

SpellingsCommission 

In September  2005, the Secretary ofEducation formed the Commission on the Future of Higher Education(‘‘Commission’’) to address collegeaccessibility, affordability, and accountability. On August10,  2006, the Commission approved a final report by an 18-1vote. The Commission report is critical of higher education in somerespects and may influence Higher Education Act reauthorization. In herremarks accepting the Commission’s report, the Secretary ofEducation identified five action items: (1) holding high schoolsaccountable for student achievement, (2) streamlining and expeditingthe process for receiving federal student financial aid, (3) developinga higher education information system with privacy-protected,student-level data, (4) providing matching funds to colleges,universities, and states that collect and publicly report studentlearning outcomes, and (5) convening members of the accreditationcommunity to move toward measures that place more emphasis on learning.The Department of Education currently is addressing theCommission’s recommendations, as well as other measures in theHigher Education Reconciliation Act, as part of negotiated rulemakingproceedings. The Commission’s recommendations may result inincreased regulatory scrutiny of Title IVprograms.

Administrative Capability

Department of Education regulations specify extensivecriteria by which an institution must establish that it has therequisite ‘‘administrative capability’’ toparticipate in Title IV programs. To 

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meet the administrative capabilitystandards, an institution, among other things, must comply with allapplicable Title IV program regulations, must not have cohort defaultrates above specified levels, must have various procedures in place forsafeguarding federal funds, must not be, and not have any principal oraffiliate who is, debarred or suspended from federal contracting orengaging in activity that is cause for debarment or suspension, mustsubmit in a timely manner all reports and financial statements requiredby the regulations and must not otherwise appear to lack administrativecapability.

Provisional Certification

In certain circumstances, including a change in ownershipresulting in a change of control, the Department of Education maycertify an institution’s continuing eligibility to participatein Title IV programs on a provisional basis that may extend no longerthan through the end of the third complete award year (July 1 –June  30) from the date of provisional certification. During theperiod of provisional certification, the institution must comply withany additional conditions included in its program participationagreement. If the Department of Education determines that aprovisionally certified institution is unable to meet itsresponsibilities under its program participation agreement, it may seekto revoke the institution’s certification to participate in TitleIV programs with fewer due process protections for the institution thanif it were fully certified. In 2004, Strayer University wasprovisionally certified due to a change in ownership and control thatoccurred when New Mountain Partners, L.P. (‘‘NewMountain’’), a private equity fund, ceased to be acontrolling stockholder of Strayer under applicable regulations.Effective January  11,  2007, Strayer University is fullycertified until September  30,  2010 based on arecertification application that Strayer University timely submitted in2006 in the ordinary course. Strayer University plans to apply timelyfor recertification prior to expiration of its current programparticipation agreement.

Third Party Servicers

Department of Education regulations permit an institutionto enter into a written contract with a third-party servicer for theadministration of any aspect of the institution’s participationin Title IV programs. The third-party servicer must, among otherobligations, comply with Title IV requirements and be jointly andseverally liable with the institution to the Secretary of Education forany violation by the servicer of any Title IV provision. An institutionmust report to the Department of Education new contracts or anysignificant modifications to contracts with third-party servicers aswell as other matters related to third-party servicers. StrayerUniversity has written contracts with four third-party servicers: Weber& Associates, Inc., Global Financial Aid Services, Inc.,Post-secondary Education Assistance Corporation, and Financial AidManagement for Education, Inc. The servicers each perform activitiesrelated to Strayer University’s participation in Title IVprograms, such as certifying FFEL Program loan applications, preparingreports from Strayer University to the Department of Education, issuingpayments for the Pell and campus-based programs and issuing andcollecting Perkins loans.

Financial Responsibility

The Higher Education Act and Department of Educationregulations establish extensive standards of financial responsibilitythat institutions such as Strayer University must satisfy in order toparticipate in Title IV programs. These standards generally requirethat an institution provide the services described in its officialpublications and statements, properly administer the Title IV programsin which it participates and meet all of its financial obligations,including required refunds and any repayments to the Department ofEducation for debts and liabilities incurred in programs administeredby the Department of Education.

Department of Education standardsutilize a complex formula to assess financial responsibility. Thestandards focus on three financial ratios: (1) equity ratio (whichmeasures the institution’s capital resources and ability toborrow); (2) primary reserve ratio (which measures theinstitution’s financial viability and liquidity) and (3) netincome ratio (which measures the institution’s ability tooperate at 

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a profit or within its means). Aninstitution’s financial ratios must yield a composite score ofat least 1.5 for the institution to be deemed financially responsiblewithout the need for further federal oversight. Strayer University hasapplied the financial responsibility standards to its audited financialstatements as of and for the year ended December  31,  2005and calculated a composite score of 3.0, the highest score available.Strayer therefore believes that Strayer University meets the Departmentof Education’s financial responsibility standards.

Student Loan Defaults 

Under the HigherEducation Act, an educational institution may lose its eligibility toparticipate in some or all of the Title IV programs if defaults on therepayment of federally guaranteed student loans by its students exceedcertain levels. For each federal fiscal year, a rate of studentdefaults (known as a ‘‘cohort defaultrate’’) is calculated for each institution with 30 ormore borrowers entering repayment in a given federal fiscal year bydetermining the rate at which borrowers who become subject to theirrepayment obligation in that federal fiscal year default by the end ofthe following federal fiscal year. For such institutions, theDepartment of Education calculates a single cohort default rate foreach federal fiscal year that includes in the cohort all current orformer student borrowers at the institution who entered repayment onany FFEL Program or Direct Loan Program loan during that year.

Under applicable regulations, if the Department of Educationnotifies an institution that its three most recent cohort default ratesare each 25 percent or greater, the institution’s participationin the FFEL Program, Direct Loan Program and Federal Pell Grant Programends 30 days after the notification, unless the institution timelyappeals that determination on specified grounds and according tospecified procedures. An institution’s participation in the FFELProgram and Direct Loan Program ends 30 days after notification thatits most recent cohort default rate is greater than 40 percent, unlessthe institution timely appeals that determination on specified groundsand according to specified procedures. An institution whoseparticipation ends under these provisions may not participate in therelevant programs for the remainder of the fiscal year in which theinstitution receives the notification, as well as for the next twofiscal years. The regulations also address cohort default rates forinstitutions that have undergone a change in status, such asacquisition or merger of institutions and acquisition of anotherinstitution’s branches or locations.

Under certaincircumstances, the Department of Education may decide to place aninstitution on provisional certification if the institution’scohort default rate equals or exceeds 25% in each of the threemost recent federal fiscal years. Provisional certification does notlimit an institution’s access to Title IV program funds;however, an institution with provisional status is subject to closerreview by the Department of Education and may be subject to summaryadverse action if it violates Title IV program requirements. StrayerUniversity’s cohort default rates on FFEL Program loans for the2002, 2003 and 2004 federal fiscal years, the three most recent yearsfor which this information is available, were 3.7%, 2.7%and 4.5%, respectively. The average cohort default rates forproprietary institutions nationally were 8.7%, 7.3% and8.6% in federal fiscal years 2002, 2003 and 2004,respectively.

The ‘‘90/10Rule’’ 

Under what is commonly referred to asthe ‘‘90/10 Rule,’’ the Higher EducationAct provides that proprietary institutions of higher education, such asStrayer University, are eligible to participate in Title IV programsonly if they derive no more than 90% of their revenues fromTitle IV programs during their latest complete fiscal year, asdetermined in accordance with a formula described in the Department ofEducation’s regulations. A proprietary institution that violatesthe ‘‘90/10 Rule’’ loses its eligibility toparticipate in Title IV programs for at least one year. Using theDepartment of Education’s formula, Strayer University derivedapproximately 71% of its cash-basis revenues from eligibleprograms in 2005 compared to 72% in 2004 and 67% in2003.

Incentive Compensation 

As apart of an institution’s program participation agreement withthe Department of Education and in accordance with the Higher EducationAct, the institution may not provide any commission, 

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bonus or other incentive payment baseddirectly or indirectly on success in securing enrollments or financialaid to any person or entity engaged in any student recruitment,admissions or financial aid awarding activity. Failure to comply withthe incentive payment rule could result in loss of ability toparticipate in federal student financial aid programs or in financialpenalties. Although there can be no assurance that the Department ofEducation would not find deficiencies in Strayer University’spresent or former employee compensation and third-party contractualarrangements, Strayer University believes that its employeecompensation and third-party contractual arrangements comply with theincentive compensation provisions of the Higher Education Act.

Distance Learning and the ‘‘50%Rules’’ 

Strayer University offers all of itsexisting degree, diploma and certificate programs through StrayerUniversity Online, delivering instruction via Internet-basedtelecommunications from Strayer’s Distance Learning Center inNewington, Virginia. To the extent required, Strayer University Onlinehas been approved by the applicable regulatory agencies in all stateswhere our campuses and Strayer University Online facilities arelocated. During the fall 2006 quarter, Strayer University had over21,000 students taking at least one online course, approximately 18,000of whom took classes solely through Strayer University Online.

The Higher Education Act generally excludes from Title IV programparticipation institutions at which more than 50% of theinstitution’s courses are offered by correspondence or at which50% or more of the institution’s students are enrolled incorrespondence courses. The Secretary of Education is authorized towaive the limitation on student enrollment in correspondence courses athis/her discretion in the case of institutions offering two- orfour-year programs leading to an associate or bachelor’s degree.Department of Education regulations grant an automatic waiver of thelimitation on student enrollment in correspondence courses if studentsenrolled in the institution’s correspondence courses receive fivepercent or less of the total Title IV program funds received by allstudents enrolled at the institution and the institution offers two- orfour-year programs leading to an associate or bachelor’s degree.In addition, a student is not eligible for Title IV program funds for acorrespondence course unless such course is part of a program leadingto an associate, bachelor’s or graduate degree. Prior toJuly  1,  2006, the Higher Education Act stated that, withrespect to institutions like Strayer University where at least half ofthe programs lead to an associate, bachelor’s, or graduatedegree, a student enrolled in a course of instruction that is offeredin whole or in part through telecommunications and leads to arecognized certificate for a program of study of one year or longer, orto a recognized associate, bachelor’s or graduate degree, is notconsidered to be enrolled in a correspondence course, unless the totalnumber of telecommunications and traditional correspondence coursesoffered by the institution equals or exceeds 50% of the totalnumber of courses offered by the institution. For purposes of the50% rules, a course must be considered as being offered onceduring an award year regardless of the number of times it is offeredduring that year, and a course that is offered both on campus andonline must be considered two courses for the purpose of determiningthe total number of courses the institution provided during an awardyear. Prior to July  1,  2006, Strayer University’spolicy was to ensure that it remained in compliance with the 50%rules by monitoring its course offerings and ensuring that the numberof courses offered through Strayer University Online did not equal orexceed one-half of the total number of courses offered by StrayerUniversity, calculated in accordance with Department of Educationregulations. Strayer University does not offer traditionalcorrespondence courses.

On February  8,  2006,President Bush signed the Deficit Reduction Act of 2005, which includedthe Higher Education Reconciliation Act of 2005. Among other measures,the Higher Education Reconciliation Act effectively repeals theso-called 50% rules with respect to telecommunications courses,effective July  1,  2006. In addition, the Act providesthat as of July  1,  2006 an otherwise eligible programoffered in whole or in part through telecommunications will be eligiblefor federal student financial aid purposes if the institution has beenevaluated and determined to deliver effectively distance educationprograms by an accreditor that is recognized by the U.S. Secretary ofEducation and that has evaluation of distance education programs withinthe scope of its recognition. Middle States’ scope ofrecognition by the U.S. Secretary of Education includes distanceeducation 

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programs offered by Middle States-accreditedinstitutions, and Middle States has expressly included distanceeducation programs in the scope of Strayer University’saccreditation. Accordingly, we believe that Strayer University’sdistance education programs meet the program eligibility requirementsof the Higher Education Reconciliation Act.

Compliance Reviews

Strayer University issubject to announced and unannounced compliance reviews and audits byvarious external agencies, including the Department of Education, itsOffice of Inspector General, state licensing agencies, guarantyagencies and accrediting agencies. The Higher Education Act andDepartment of Education regulations also require an institution tosubmit annually to the Secretary of Education a compliance audit of itsadministration of the Title IV programs conducted by an independentcertified public accountant in accordance with Government AuditingStandards and applicable audit guides of the Department ofEducation’s Office of Inspector General. In addition, to enablethe Secretary of Education to make a determination of financialresponsibility, an institution must submit annually to the Secretary ofEducation audited financial statements prepared in accordance withDepartment of Education regulations.

PotentialEffect of Regulatory Violations 

If Strayer Universityfails to comply with the regulatory standards governing Title IVprograms, the Department of Education could impose one or moresanctions, including transferring Strayer University from the advancepayment method to the reimbursement or cash monitoring system ofpayment, seeking to require repayment of certain Title IV funds,requiring the University to post a letter of credit in favor of theDepartment of Education as a condition for continued Title IVcertification, taking emergency action against the University,referring the matter for criminal prosecution or initiating proceedingsto impose a fine or to limit, condition, suspend or terminate theparticipation of the University in Title IV programs. In addition,Strayer University’s guaranty agencies could initiateproceedings to limit, suspend or terminate Strayer University’seligibility to provide guaranteed student loans in the event of certainregulatory violations. Although there are no such sanctions currentlyin force, and Strayer University does not believe any such sanctions orproceedings are presently contemplated, if such sanctions orproceedings were imposed against Strayer University and resulted in asubstantial curtailment of the University’s participation inTitle IV programs, Strayer University would be materially and adverselyaffected.

If Strayer University lost its eligibility toparticipate in Title IV programs, or if the amount of available federalstudent financial aid were reduced, the University would seek toarrange or provide alternative sources of revenue or financial aid forstudents. Although the University believes that one or more privateorganizations would be willing to provide financial assistance tostudents attending Strayer University, there is no assurance that thiswould be the case, and the interest rate and other terms of suchstudent financial aid might not be as favorable as those for Title IVprogram funds. Strayer University might be required to guarantee all orpart of such alternative assistance or might incur other additionalcosts in connection with securing alternative sources of financial aid.Accordingly, the loss of eligibility of Strayer University toparticipate in Title IV programs, or a reduction in the amount ofavailable federal student financial aid, would be expected to have amaterial adverse effect on Strayer University even if it could arrangeor provide alternative sources of revenue or student financial aid.

Restrictions on Adding Locations and EducationalPrograms 

State requirements and accrediting agencystandards limit the ability of Strayer University to establishadditional locations and programs. Many states require approval beforeinstitutions can add new programs, campuses or teaching locations.Middle States requires institutions that it accredits to notify it inadvance of implementing new programs or locations, and uponnotification may undertake a review of the institution’saccreditation. Middle States may also at its discretion conduct sitevisits to additional locations to ensure that accredited institutionsthat experience rapid growth in the number 

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of additional locations maintain educationalquality. In November  2006, Middle States approved StrayerUniversity’s two new campuses in Kentucky, which opened for thewinter 2007 term, as well as two new campuses in the Orlando, Floridamarket that Strayer University opened for the spring 2007 term. AllStrayer University new campus locations require Middle States approval,and Middle States has indicated that it will review the remainder ofour planned 2007 openings upon completion of the reaffirmation process(see ‘‘Accreditation,’’ above).

TheHigher Education Act requires proprietary institutions of highereducation to be in full operation for two years before qualifying toparticipate in Title IV programs. However, the applicable regulationsin many circumstances permit an institution that is already qualifiedto participate in Title IV programs to establish additional locationsthat are exempt from the two-year rule. Such additional locationsgenerally may qualify immediately for participation in the Title IVprograms, unless the location was acquired from another institutionthat has ceased offering educational programs at that location and hasTitle IV liabilities that it is not repaying in accordance with anagreement to do so, and the acquiring institution does not agree to beresponsible for certain liabilities of the acquired institution. Thenew location must satisfy all other applicable requirements forinstitutional eligibility, including approval of the additionallocation by the relevant state authorizing agency and theinstitution’s accrediting agency. Strayer University’sexpansion plans assume its continued ability to establish new campusesas additional locations of Strayer University under such applicableregulations and thereby to avoid incurring the two-year delay inparticipation in Title IV programs. The loss of state authorization oraccreditation of Strayer University or an existing campus, or thefailure of Strayer University or a new campus to obtain stateauthorization or accreditation, would render Strayer Universityineligible to participate in Title IV programs at least in that stateor at that location.

The Department of Education regulationsrequire institutions to report to the Department of Education a newadditional location at which at least 50% of an eligible programwill be offered, if the institution wants to disburse Title IV programfunds to students enrolled at that location. If the institutionparticipates in Title IV programs under provisional certification, asthe University did until January  11,  2007 as a result ofNew Mountain’s ceasing to be a controlling stockholder of Strayerunder applicable regulations (see ‘‘Change in OwnershipResulting in a Change of Control,’’ below), and in othercircumstances specified in the Department of Education’sregulations, the institution must obtain Department of Educationapproval for the new location before providing Title IV assistance tostudents at that location. Otherwise, once it reports the location tothe Department of Education, the institution may disburse Title IVprogram funds to eligible students at that location if the location islicensed and accredited. Institutions are responsible for knowingwhether they need approval, and institutions that add locations anddisburse Title IV program funds without having obtained any necessaryDepartment of Education approval may be subject to administrativerepayments and other sanctions. Strayer does not believe that theDepartment of Education’s regulations will create significantobstacles to Strayer University’s plans to add new campuses.

Generally, if an institution eligible to participate in Title IVprograms adds an educational program after it has been designated as aneligible institution, the institution must apply to the Department ofEducation to have the additional program designated as eligible.However, a degree-granting institution such as Strayer University isnot obligated to obtain Department of Education approval of additionalprograms that lead to an associate, bachelor’s, professional orgraduate degree at a level already granted. Similarly, an institutionis not required to obtain advance approval for new programs that bothprepare students for gainful employment in the same or relatedrecognized occupation as an educational program that has previouslybeen designated as an eligible program at that institution and meetcertain minimum-length requirements. In the event that an institutionthat does not have the Department of Education’s expressapproval for the addition of a new program erroneously determines thatthe new educational program is eligible for Title IV funds, theinstitution may be liable for repayment of Title IV aid received by theinstitution or students in connection with that program. Strayer doesnot believe that the Department of Education’s regulations willcreate significant obstacles to Strayer University’s plans toadd new programs.

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Change in OwnershipResulting in a Change of Control 

Many states andaccrediting agencies require institutions of higher education to reportor obtain approval of certain changes in ownership or other aspects ofinstitutional status, but the types of and triggers for such reportingor approval vary among states and accrediting agencies. In addition,Strayer University’s accrediting agency, Middle States, requiresinstitutions that it accredits to inform it in advance of anysubstantive change, including a change that significantly alters theownership or control of the institution. Examples of substantivechanges requiring advance notice to Middle States include changes inthe legal status, ownership or form of control of the institution, suchas the sale of a proprietary institution. Middle States must approve asubstantive change in advance in order to include the change in theinstitution’s accreditation status.

The Higher EducationAct provides that an institution that undergoes a change in ownershipresulting in a change of control loses its eligibility to participatein the Title IV programs and must apply to the Department of Educationin order to reestablish such eligibility. An institution is ineligibleto receive Title IV program funds during the period prior torecertification. The Higher Education Act provides that the Departmentof Education may temporarily, provisionally certify an institutionseeking approval of a change of ownership and control based onpreliminary review by the Department of Education of a materiallycomplete application received by the Department of Education within 10business days after the transaction. The Department of Education maycontinue such temporary, provisional certification on a month-to-monthbasis until it has rendered a final decision on theinstitution’s application. If the Department of Educationdetermines to approve the application after a change in ownership andcontrol, it issues a provisional certification, which extends for aperiod expiring not later than the end of the third complete award yearfollowing the date of provisional certification. The Higher EducationAct defines one of the events that would trigger a change in ownershipresulting in a change of control as the transfer of the controllinginterest of the stock of the institution or its parent corporation. Fora publicly traded corporation, the securities of which are required tobe registered under the Exchange Act, such as Strayer, the Departmentof Education regulations implementing the Higher Education Act define achange in ownership resulting in a change of control as occurring whena person acquires ownership and control of a corporation such that thecorporation is required to file a Form 8-K with the Securities andExchange Commission (‘‘SEC’’) notifyingthat agency of the change of control. The regulations also provide thata change in ownership and control of a publicly traded corporationoccurs if a person who is a controlling stockholder of the corporationceases to be a controlling stockholder. A controlling stockholder is astockholder who holds or controls through agreement both 25% ormore of the total outstanding voting stock of the corporation and moreshares of voting stock than any other stockholder.

StrayerUniversity currently has Department of Homeland Security approval toadmit foreign students for U.S. study, subject to applicableregulations. In certain circumstances, the Department of HomelandSecurity may require an institution to obtain approval for a change inownership and control.

Pursuant to federal law providing benefitsfor veterans and reservists, Strayer University is approved foreducation of veterans and members of the selective reserve and theirdependents by the state approving agency in Pennsylvania, Maryland,Washington, D.C., Virginia, North Carolina, South Carolina, Tennessee,Georgia and Florida. In certain circumstances, state approving agenciesmay require an institution to obtain approval for a change in ownershipand control.

In March  2001, in order to complete thechange of ownership associated with Strayer’s self-tender offerto repurchase common shares and its issuance of its Series A PreferredStock to New Mountain Partners, L.P., which is a private equity fundmanaged by New Mountain Capital, LLC, and MidOcean (formerly known asDB Capital Investors, L.P.) which is a private equity fund managed byMidOcean US Advisor, L.P., Strayer University was required to make anumber of submissions to educational regulatory bodies, including,among others: (1) filing a ‘‘substantivechange’’ report with Middle States; (2) filing anapplication for approval to participate in federal student financialaid programs with the Department of Education; (3) filings with theD.C. Education Licensure Commission, the Maryland Higher EducationCommission and the Virginia State Council of Higher Education; and (4)filings 

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with the Immigration and NaturalizationService of the U.S. Department of Justice (the Department of HomelandSecurity’s predecessor agency with respect to, among othermatters, foreign students and exchange visitors) and state approvingagencies for veterans benefits in Washington, D.C., Maryland andVirginia. All of the applicable agencies approved the transaction,which closed in May  2001.

In February  2004, NewMountain transferred 350,000 of its shares of the Company’sSeries A Convertible Redeemable Preferred Stock (together with allassociated accrued cash and stock dividends), representingapproximately 2.6% of the outstanding common stock equivalentsof Strayer, (the ‘‘Trust Shares’’) to theNew Mountain Strayer Trust, an irrevocable trust. Thebeneficiaries of the trust are all of New Mountain’s partners,at the time of a distribution from the trust, who are U.S. citizens orresidents for tax purposes. Before transferring the Trust Sharesto the trust, New Mountain irrevocably deposited into escrow the TrustShares and gave to the trustee an irrevocable proxy to vote the TrustShares during the escrow period. In connection with the transferto escrow and the associated reduction in New Mountain’sownership and control below the Department of Education’s25% regulatory threshold, Strayer University was required tomake a number of submissions to educational regulatory bodies,including, among others, filing an application for approval to continueto participate in federal student financial aid programs with theDepartment of Education. All of the applicable regulatoryagencies approved the transaction. As is customary for institutionsundergoing a change of ownership resulting in a change of control, theDepartment of Education recertified the University on a provisionalbasis through December  2006. After the Department of Educationand other relevant regulatory agencies approved the change in ownershipand control resulting from the transfer of the Trust Shares intoescrow, the escrow agent transferred the Trust Shares to the NewMountain Strayer Trust. The University’s educationregulators, including the Department of Education, Middle States andrelevant state education agencies, either did not require or providedapproval in connection with the subsequent public offering inFebruary  2004.

If Strayer University underwent a change ofcontrol that required approval by any state authority, Middle States orany federal agency, and any required regulatory approval weresignificantly delayed, limited or denied, there could be a materialadverse effect on Strayer University’s ability to offer certaineducational programs, award certain degrees, diplomas or certificates,operate one or more of its locations, admit certain students orparticipate in Title IV programs, which in turn would materially andadversely affect Strayer University’s operations. A change thatrequired approval by a state regulatory authority, Middle States or afederal agency could also delay Strayer University’s ability toestablish new campuses or educational programs and may have otheradverse regulatory effects. Furthermore, the suspension from Title IVprograms and the necessity of obtaining regulatory approvals inconnection with a change of control may materially limit StrayerUniversity’s flexibility in future financing or acquisitiontransactions.

Additional Information

We maintain awebsite at http://www.strayereducation.com. The information on ourwebsite is not incorporated by reference in this Annual Report on Form10-K and our web address is included as an inactive textual referenceonly. We make available on our website our Annual Report on Form 10-K,Quarterly Reports on Form 10-Q, Current Reports on Form 8-K andamendments to those reports filed or furnished pursuant to Section13(a) or 15(d) of the Exchange Act as soon as reasonably practicableafter we electronically file such material with, or furnish it to, theSEC.

The Form 10-K and other reports filed with the SEC can beread or copied at the SEC’s Public Reference Room at 100 FStreet, NE, Washington, D.C. 20549. Information on the operation of thePublic Reference Room can be obtained by calling the SEC at1-800-SEC-0330. The SEC maintains a website that contains reports,proxy and information statements, and other information regardingissuers that file electronically with the SEC; the website address ishttp://www.sec.gov.

Item 1A.    RiskFactors

Investing in our common stock involves a high degreeof risk. You should carefully consider the following risk factors andall other information contained in this Annual Report on Form 10-K orin the 

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documents incorporated by reference hereinbefore deciding to purchase our common stock. The occurrence of any ofthe following risks could materially harm our business, and you couldsuffer a complete loss of your investment. See‘‘Cautionary Notice Regarding Forward-LookingStatements.’’

Risks Related to ExtensiveRegulation of Our Business

If we fail to complywith the extensive regulatory requirements for our business, we couldface significant monetary liabilities, fines and penalties, includingloss of access to federal student loans and grants for our students.

As a provider of higher education, we are subject toextensive regulation on both the federal and state levels. Inparticular, the Higher Education Act of 1965, as amended (the‘‘Higher Education Act’’), and relatedregulations subject Strayer University and all other higher educationinstitutions that participate in the various federal student financialaid programs under Title IV of the Higher Education Act(‘‘Title IV programs’’) to significantregulatory scrutiny.

The Higher Education Act mandates specificregulatory responsibilities for each of the following components of thehigher education regulatory triad: (1) the federal governmentthrough the U.S. Department of Education (the‘‘Department of Education’’);(2) the accrediting agencies recognized by the U.S. Secretary ofEducation and (3) state education regulatory bodies.

Theregulations, standards and policies of these regulatory agenciesfrequently change, and changes in, or new interpretations of,applicable laws, regulations or standards could have a material adverseeffect on our accreditation, authorization to operate in variousstates, permissible activities, receipt of funds under Title IVprograms or costs of doing business.

If we are found to be innoncompliance with any of these regulations, standards or policies, wecould lose our access to Title IV program funds, which would have amaterial adverse effect on our business. In the 2006 fall term,approximately 57% of our students participated in one or moreTitle IV programs. Findings of noncompliance also could result in ourbeing required to pay monetary damages, or being subjected to fines,penalties, injunctions, restrictions on our access to Title IV programfunds or other censure that could have a material adverse effect on ourbusiness.

If we fail to maintain our institutionalaccreditation, we would lose our ability to participate in Title IVprograms. 

Strayer University is institutionally accreditedby the Middle States Commission on Higher Education(‘‘Middle States’’), one of the sixregional accrediting agencies recognized by the U.S. Secretary ofEducation as a reliable authority as to educational quality.Accreditation by an accrediting agency recognized by the Secretary ofEducation is required in order for an institution to become and remaineligible to participate in Title IV programs. The loss of accreditationwould, among other things, render Strayer University ineligible toparticipate in Title IV programs and would have a material adverseeffect on our business. In addition, an adverse action by Middle Statesother than loss of accreditation, such as issuance of a warning, couldhave a material adverse effect on our business or have an adverseeffect on the market price of our common stock.

Ifwe fail to maintain any of our state authorizations, we would lose ourability to operate in that state and to participate in Title IVprograms there. 

With respect to each campus, StrayerUniversity is authorized to operate and to grant degrees, diplomas orcertificates by the applicable education agency of the state where thecampus is located. Such state authorization is required in order forstudents at the campus to be eligible to participate in Title IVprograms. The loss of authorization in a state would, among otherthings, render Strayer University ineligible to participate in Title IVprograms at least at those state campus locations and could have amaterial adverse effect on our business.

Studentloan defaults could result in the loss of eligibility to participate inTitle IV programs. 

In general, under the Higher EducationAct, an educational institution may lose its eligibility to participatein some or all Title IV programs if, for three consecutive federalfiscal years, 25% or more 

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of its students who were required to beginrepaying their student loans in the relevant federal fiscal yeardefault on their payment by the end of the next federal fiscal year. Inaddition, an institution may lose its eligibility to participate insome or all Title IV programs if its default rate for a federal fiscalyear was greater than 40%. If we lose eligibility to participatein Title IV programs because of high student loan default rates, itwould have a material adverse effect on our business. StrayerUniversity’s default rates calculated by the Department ofEducation on Federal Family Education Loan Program loans for the 2002,2003 and 2004 federal fiscal years, the three most recent years forwhich this information is available, were 3.7%, 2.7% and4.5%, respectively. The average cohort default rates forproprietary institutions nationally, as calculated by the Department ofEducation, were 8.7%, 7.3% and 8.6% in federalfiscal years 2002, 2003 and 2004, respectively.

Afailure to demonstrate ‘‘administrativecapability’’ or ‘‘financialresponsibility’’ may result in the loss of eligibility toparticipate in Title IV programs. 

If we fail to maintain‘‘administrative capability’’ as defined bythe Department of Education, we could lose our eligibility toparticipate in Title IV programs or have that eligibility adverselyconditioned, which would have a material adverse effect on ourbusiness. Furthermore, if we fail to demonstrate‘‘financial responsibility’’ under theDepartment of Education’s regulations, we could lose oureligibility to participate in Title IV programs or have thateligibility adversely conditioned, which would have a material adverseeffect on our business.

We are subject tosanctions if we fail to calculate and make timely payment of refunds ofTitle IV program funds for students who withdraw before completingtheir educational program. 

The Higher Education Act andDepartment of Education regulations require us to calculate refunds ofunearned Title IV program funds disbursed to students who withdraw fromtheir educational program before completing it. If refunds are notproperly calculated or timely paid, we may be sanctioned or subject toother adverse actions by the Department of Education, which could havea material adverse effect on our business.

We aredependent on the renewal and maintenance of Title IV programs.

Congress reauthorizes the Higher Education Act, which isthe law governing Title IV programs, approximately every five to sixyears. Congress is currently considering reauthorization of the HigherEducation Act. Additionally, Congress determines the funding level foreach Title IV program on an annual basis. Any action by Congress thatsignificantly reduces funding for Title IV programs or the ability ofour school or students to participate in these programs couldmaterially harm our business. A reduction in government funding levelscould lead to lower enrollments at our school and require us to arrangefor alternative sources of financial aid for our students. Lowerstudent enrollments or our inability to arrange such alternativesources of funding could adversely affect our business.

Our school would lose its eligibility to participatein federal student financial aid programs if the percentage of ourrevenues derived from those programs were too high. 

Aproprietary institution loses its eligibility to participate in thefederal student financial aid programs if it derives more than90% of its revenues, on a cash basis, from these programs in anyfiscal year. Using the Department of Education’s formula, wederived approximately 71% of our cash-basis revenues from theseprograms in 2005.

Our failure to comply with theDepartment of Education’s incentive compensation rules couldresult in sanctions. 

If we pay a bonus, commission orother incentive payment in violation of applicable requirements, wecould be subject to sanctions, which could have a material adverseeffect on our business.

Risks Related to OurBusiness

We may not be able to sustainour recent growth rate, and we may not be able to manage future growtheffectively. 

We have experienced a period of significantgrowth since the beginning of 2001. Over this period, we opened 33 newcampuses and our revenue increased 22% between 2000 and 2006 ona compound 

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annual basis. Our ability to sustain ourcurrent rate of growth depends on a number of factors, including ourability to obtain regulatory approvals, our ability to recruit andretain high quality academic and administrative personnel at newcampuses and competitive factors. In addition, growth and expansion ofour operations may place a significant strain on our resources andincreased demands on our management information and reporting systems,financial management controls and personnel. Although we have made asubstantial investment in augmenting our financial and managementinformation systems and other resources to support future growth, wecannot assure you that we will be able to manage further expansioneffectively. Failure to do so could adversely affect our business.

Our success depends in part on our ability toupdate and expand the content of existing programs and develop newprograms in a cost-effective manner and on a timely basis.

Our success depends in part on our ability to update andexpand the content of our programs, develop new programs in acost-effective manner and meet students’ needs in a timelymanner. Prospective employers of our graduates increasingly demand thattheir entry-level employees possess appropriate technological and otherskills. The update and expansion of our existing programs and thedevelopment of new programs may not be accepted by students,prospective employers or the online education market. If we cannotrespond to changes in industry requirements, our business may beadversely affected. Even if we are able to develop acceptable newprograms, we may not be able to introduce these new programs as quicklyas students require due to regulatory constraints or as quickly as ourcompetitors introduce competing new programs.

Our strategy of opening new schools andadding new services is dependent on regulatory approvals and requiressignificant resources. 

Establishing new schools andlocations and adding new services require us to make investments inmanagement and capital expenditures, incur marketing expenses andreallocate other resources. To open a new school or location, we arerequired to obtain appropriate federal, state, and accrediting agencyapprovals, which may be conditioned or delayed in a manner which couldsignificantly affect our growth plans. In addition, to be eligible forfederal student financial aid programs, the new school or locationwould have to be approved by the Department of Education. We cannotassure you that we will be able to open successfully new campuslocations or add new services in the future. Our failure to manageeffectively the operations of newly established schools and locationscould adversely affect our business.

Ourfinancial performance depends in part on our ability to continue todevelop awareness of the programs we offer among working adultstudents. 

The continued development of awareness of theprograms we offer among working adult students is critical to thecontinued acceptance and growth of our programs. If we are unable tocontinue to develop awareness of the programs we offer, this couldlimit our enrollments and negatively impact our business. The followingare some of the factors that could prevent us from successfullymarketing our programs:

|  |              |                                              |
|--|--------------|----------------------------------------------|
|  | •  | theemergence of more successful competitors; |

|  |              |                                                         |
|--|--------------|---------------------------------------------------------|
|  | •  | customer dissatisfaction with our servicesand programs; |

|  |              |                                                  |
|--|--------------|--------------------------------------------------|
|  | •  | performance problems withour online systems; and |

|  |              |                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------|
|  | •  | our failure tomaintain or expand our brand or other factors related to ourmarketing. |

We face strong competition in thepost-secondary education market. 

Post-secondary educationin our market area is highly competitive. We compete with traditionalpublic and private two-year and four-year colleges, other for-profitschools and alternatives to higher education, such as employment andmilitary service. Public colleges may offer programs similar to thoseof Strayer University at a lower tuition level as a result ofgovernment subsidies, government 

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and foundation grants, tax-deductiblecontributions and other financial sources not available to proprietaryinstitutions. Some of our competitors in both the public and privatesectors have substantially greater financial and other resources thanwe do. This strong competition could adversely affect our business.

Strayer University Online and Strayer University donot rely on exclusive proprietary rights and intellectual property, andcompetitors may attempt to duplicate Strayer programs and methods.

Third parties may attempt to develop competing programs orduplicate or copy aspects of Strayer University’s curriculum,online library, quality management and other proprietary content. Anysuch attempt, if successful, could adversely affect our business. Inthe ordinary course of its business, Strayer develops intellectualproperty of many kinds that is or will be the subject of copyright,trademark, service mark, patent, trade secret or other protections.Such intellectual property includes but is not limited toStrayer’s courseware materials for classes taught via theInternet or via other distance learning means and business know-how andinternal processes and procedures developed to respond to therequirements of its various education regulatory agencies.

Our future success depends in part upon our ability torecruit and retain key personnel. 

In connection with ourMay 2001 recapitalization, we hired a new management team,including Robert S. Silberman, our Chairman and Chief ExecutiveOfficer, to implement our new growth strategy. Our success to date hasbeen, and our continuing success will be, substantially dependent uponour ability to attract and retain highly qualified executive officers,faculty and administrators and other key personnel. If we cease toemploy any of these integral personnel or fail to manage a smoothtransition to new personnel, our business could suffer.

Seasonal and other fluctuations in our operatingresults could adversely affect the trading price of our common stock.

Our business is subject to seasonal fluctuations, whichcause our operating results to fluctuate from quarter to quarter. Thisfluctuation may result in volatility or have an adverse effect on themarket price of our common stock. We experience, and expect to continueto experience, seasonal fluctuations in our revenue. Historically, ourquarterly revenues and income have been lowest in the third quarter(July through September) because fewer students are enrolled during thesummer months. We also incur significant expenses in preparing for ourpeak enrollment in the fourth quarter (October through December),including investing in online infrastructure necessary to supportincreased usage. These investments result in fluctuations in ouroperating results which could result in volatility or have an adverseeffect on the market price of our common stock. In addition, because ofthe recent increase in the use of personal computers and access to theInternet, the online education market is a rapidly evolving market, andwe may not be able to accurately forecast future enrollment growth andrevenues.

Regulatory requirements may make it moredifficult to acquire us. 

A change in ownership resultingin a change of control of Strayer would trigger a requirement forrecertification of Strayer University by the Department of Educationfor purposes of participation in federal student financial aidprograms, a review of Strayer University’s accreditation byMiddle States and reauthorization of Strayer University by certainstate licensing and other regulatory agencies. If we underwent a changeof control that required approval by any state authority, Middle Statesor any federal agency, and any required regulatory approval weresignificantly delayed, limited or denied, there could be a materialadverse effect on our ability to offer certain educational programs,award certain degrees, diplomas or certificates, operate one or more ofour locations, admit certain students or participate in Title IVprograms, which in turn could have a material adverse effect on ourbusiness. These factors may discourage takeover attempts.

Capacity constraints or system disruptions to StrayerUniversity Online’s computer networks could damage the reputationof Strayer University and limit our ability to attract and retainstudents. 

The performance and reliability of StrayerUniversity Online’s program infrastructure is critical to ourreputation and ability to attract and retain students. Any system erroror failure, or a sudden and 

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significant increase in traffic, couldresult in the unavailability of Strayer University Online’scomputer networks. We cannot assure you that Strayer University Onlinewill be able to expand its program infrastructure on a timely basissufficient to meet demand for its programs. Strayer UniversityOnline’s computer systems and operations could be vulnerable tointerruption or malfunction due to events beyond its control, includingnatural disasters and telecommunications failures. Any interruption toStrayer University Online’s computer systems or operations couldhave a material adverse effect on our ability to attract and retainstudents.

Strayer University Online’scomputer networks may be vulnerable to security risks that coulddisrupt operations and require it to expend significant resources.

Strayer University Online’s computer networks may bevulnerable to unauthorized access, computer hackers, computer virusesand other security problems. A user who circumvents security measurescould misappropriate proprietary information or cause interruptions ormalfunctions in operations. As a result, Strayer University Online maybe required to expend significant resources to protect against thethreat of these security breaches or to alleviate problems caused bythese breaches.

Strayer University Online operatesin a highly competitive market with rapid technological changes and itmay not compete successfully. 

Online education is a highlyfragmented and competitive market that is subject to rapidtechnological change. Competitors vary in size and organization fromtraditional colleges and universities, many of which have some form ofonline education programs, to for-profit schools, corporateuniversities and software companies providing online education andtraining software. We expect the online education and training marketto be subject to rapid changes in technologies. Strayer UniversityOnline’s success will depend on its ability to adapt to thesechanging technologies.

Government regulationsrelating to the Internet could increase Strayer UniversityOnline’s cost of doing business, affect its ability to grow orotherwise have a material adverse effect on our business.

The increasing popularity and use of the Internet and otheronline services for the delivery of education has led and may lead tothe adoption of new laws and regulatory practices in the United Statesor foreign countries or to the interpretation of the application ofexisting laws and regulations to such services. These new laws andinterpretations may relate to issues such as online privacy, copyright,trademark and service mark, sales taxes, fair business practices andthe requirement that online education institutions qualify to dobusiness as a foreign corporation or be licensed as a school in one ormore jurisdictions where they have no physical location. New laws,regulations or interpretations related to doing business over theInternet could increase Strayer University Online’s cost of doingbusiness, affect its ability to increase enrollments and revenues orotherwise have a material adverse effect on our business.

Inaddition, as of July  1,  2006, if Strayer University failsto meet Middle States’ standards with respect to distanceeducation, its otherwise eligible distance education programs couldlose eligibility for federal student financial aid programs. Such anoccurrence would have a material adverse effect on our business.

We may not be able to successfully complete orintegrate future acquisitions. 

As part of our growthstrategy, we expect to consider selective acquisitions. We cannotassure you that we will be able to complete successfully anyacquisitions on favorable terms, or that if we do, we will be able tosuccessfully integrate the personnel, operations and technologies ofany such acquisitions. Our failure to successfully complete orintegrate future acquisitions could disrupt our business and materiallyand adversely affect our profitability and liquidity by distracting ourmanagement and employees and increasing our expenses. In addition,because an acquisition is considered a change in ownership and controlof the acquired institution under applicable regulatory standards, wemust seek approval from the Department of Education and most applicablestate agencies and accrediting agencies and possibly other regulatorybodies when we acquire an institution. If we were unable to obtain suchapprovals of an institution we acquired, depending on the size of thatacquisition, that failure could have a material adverse effect on ourbusiness.

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Item 1B.    Unresolved StaffComments

There are no SEC staff comments on the Company’speriodic SEC reports which are unresolved.

Item2.    Properties

We lease all of our campus and administrativefacilities except for six campus facilities which we own. Our campusesare located in Pennsylvania, Delaware, Maryland, Washington, D.C.,Virginia, North Carolina, South Carolina, Georgia, Tennessee, Florida,Alabama and Kentucky, and our corporate headquarters is located inVirginia. Our leases generally range from five to ten years with one totwo renewal options for extended terms. As of December31,  2006, we leased 46 campus and administrative facilitiesconsisting of approximately 640,000 square feet. The facilities that weown consist of approximately 140,000 square feet.

We evaluatecurrent utilization of our facilities and projected enrollment growthto determine facility needs. We anticipate that approximately anadditional 130,000 square feet will be leased in 2007.

Item3.    Legal Proceedings

From time to time, the Company isinvolved in litigation and other legal proceedings arising out of theordinary course of its business. There are no pending material legalproceedings to which the Company is subject or to which theCompany’s property is subject.

Item 4.    Submission ofMatters to a Vote of Security Holders

No matters were voted uponby stockholders during the fourth quarter of2006.

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PARTII

Item 5.    Market for Registrant’s Common Equity,Related Stockholder Matters and Issuer Purchases of EquitySecurities

Our common stock is traded on the Nasdaq NationalMarket under the symbol ‘‘STRA.’’ Thefollowing table sets forth, for the periods indicated, the high, low,and closing sale prices of the Company’s common stock, asreported on the Nasdaq NationalMarket.

|               |  |  |      |   |        |     |  |  |       |   |        |  |  |  |  |   |        |  |
|---------------|--|--|------|---|--------|-----|--|--|-------|---|--------|--|--|--|--|---|--------|--|
|          |  |  | High |   |        | Low |  |  | Close |
| 2006          |  |  |      |   |   |     |  |  |       |   |   |  |  |  |  |   |   |  |
| FirstQuarter  |  |  |      | $ | 104.49 |     |  |  |       | $ | 87.07  |  |  |  |  | $ | 102.26 |  |
| SecondQuarter |  |  |      | $ | 112.00 |     |  |  |       | $ | 94.34  |  |  |  |  | $ | 97.12  |  |
| ThirdQuarter  |  |  |      | $ | 111.49 |     |  |  |       | $ | 92.59  |  |  |  |  | $ | 108.21 |  |
| FourthQuarter |  |  |      | $ | 118.88 |     |  |  |       | $ | 100.84 |  |  |  |  | $ | 106.05 |  |
| 2005          |  |  |      |   |   |     |  |  |       |   |   |  |  |  |  |   |   |  |
| FirstQuarter  |  |  |      | $ | 115.96 |     |  |  |       | $ | 102.18 |  |  |  |  | $ | 113.32 |  |
| SecondQuarter |  |  |      | $ | 115.21 |     |  |  |       | $ | 77.24  |  |  |  |  | $ | 86.26  |  |
| ThirdQuarter  |  |  |      | $ | 103.27 |     |  |  |       | $ | 78.27  |  |  |  |  | $ | 94.52  |  |
| FourthQuarter |  |  |      | $ | 102.70 |     |  |  |       | $ | 85.37  |  |  |  |  | $ | 93.70  |  |
|               |

PeerGroup Performance Graph

The following performance graphcompares the Company’s cumulative stockholder return on itscommon stock since December  31,  2001 with The NASDAQStock Market (U.S.) Index and a self-determined peer group consistingof Apollo Group, Inc. (APOL), Career Education Corporation (CECO),Corinthian Colleges, Inc. (COCO), DeVry, Inc. (DV), and ITT EducationalServices, Inc. (ESI). At present, there is no comparative index for theeducation industry. This graph is not deemed to be‘‘soliciting material’’ or to be filed withthe SEC or subject to the SEC’s proxy rules or to theliabilities of Section 18 of the Securities Exchange Act, and the graphshall not be deemed to be incorporated by reference into any prior orsubsequent filing by the Company under the Securities Act or theSecurities Exchange Act.

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Comparison of 60 Month Cumulative TotalReturn*Among Strayer Education, Inc.The NASDAQ Stock Market(U.S.) Index and a Peer Group

|                          |  |  |          |  |     |          |  |  |          |  |     |          |  |  |          |  |     |          |  |  |  |  |     |  |  |  |  |  |     |  |  |  |  |  |     |  |
|--------------------------|--|--|----------|--|-----|----------|--|--|----------|--|-----|----------|--|--|----------|--|-----|----------|--|--|--|--|-----|--|--|--|--|--|-----|--|--|--|--|--|-----|--|
| Name                     |  |  | 12/31/01 |  |     | 12/31/02 |  |  | 12/31/03 |  |     | 12/31/04 |  |  | 12/30/05 |  |     | 12/29/06 |
| StrayerEducation,Inc.    |  |  |          |  | 100 |          |  |  |          |  | 118 |          |  |  |          |  | 223 |          |  |  |  |  | 225 |  |  |  |  |  | 192 |  |  |  |  |  | 218 |  |
| NASDAQStock Market(U.S.) |  |  |          |  | 100 |          |  |  |          |  | 68  |          |  |  |          |  | 103 |          |  |  |  |  | 112 |  |  |  |  |  | 113 |  |  |  |  |  | 124 |  |
| PeerGroup                |  |  |          |  | 100 |          |  |  |          |  | 127 |          |  |  |          |  | 207 |          |  |  |  |  | 215 |  |  |  |  |  | 177 |  |  |  |  |  | 143 |  |
|                          |

|  |
|--|
|  |  |
|  |

|   |                                                                                                                                                                                        |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * | Thecomparison assumes $100 was invested on December  31,  2001in the Company’s common stock, the NASDAQ Stock Market (U.S.)Index and the peer companies selected by the Company. |

NOTE:    Peer group consists of Apollo Group, Inc., CareerEducation Corporation, Corinthian Colleges, Inc., DeVry, Inc. and ITTEducational Services, Inc.

As of January  31,  2007,there were 14,293,584 shares of common stock outstanding, andapproximately 80 holders of record. In addition, there exist a number(approximately 17,000 as of December  2006) of institutional andother holders of common stock whose shares are held in nominee accountsby brokers.

As announced on November  3,  2003, theCompany’s Board of Directors initially authorized the Company torepurchase up to an aggregate of $15  million in value of commonstock through December  31,  2004 in open market purchasesfrom time to time at the discretion of the Company’s management,depending on market conditions and other corporate considerations. TheCompany’s Board of Directors amended the program on variousdates, increasing the repurchase amount authorized and extending theexpiration date. Since inception, a total of $145  million hasbeen authorized by the Company’s Board of Directors for sharerepurchases through December  31,  2007, of which$32  million was remaining at December  31,  2006.All of the Company’s share repurchases were effected incompliance with Rule 10b-18 under the Securities Exchange Act of 1934,as amended. This share repurchase plan may be modified, suspended orterminated at any time by the Company without notice.

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A summary of the Company’s sharerepurchases since the inception of the plan is asfollows:

|        |  |  |                   |  |           |                            |  |  |                         |  |        |  |  |  |  |  |       |  |
|--------|--|--|-------------------|--|-----------|----------------------------|--|--|-------------------------|--|--------|--|--|--|--|--|-------|--|
|   |  |  | Sharesrepurchased |  |           | Averagepricepaid per share |  |  | Cost ofsharerepurchases |
|   |  |  | (#)               |  |           | ($)                        |  |  | ($mil.)                 |
| 2003   |  |  |                   |  | 32,350    |                            |  |  |                         |  | 99.57  |  |  |  |  |  | 3.2   |  |
| 2004   |  |  |                   |  | 346,444   |                            |  |  |                         |  | 106.13 |  |  |  |  |  | 36.8  |  |
| 2005   |  |  |                   |  | 410,071   |                            |  |  |                         |  | 92.59  |  |  |  |  |  | 38.0  |  |
| 2006   |  |  |                   |  | 349,066   |                            |  |  |                         |  | 100.39 |  |  |  |  |  | 35.0  |  |
| Total  |  |  |                   |  | 1,137,931 |                            |  |  |                         |  | 99.30  |  |  |  |  |  | 113.0 |  |
|        |

Asummary of the Company’s share repurchases during the threemonths ended December  31,  2006 is asfollows:

|          |  |  |                                   |  |         |                            |  |  |                                      |  |         |  |  |  |  |  |        |  |
|----------|--|--|-----------------------------------|--|---------|----------------------------|--|--|--------------------------------------|--|---------|--|--|--|--|--|--------|--|
|     |  |  | Totalnumber of sharesrepurchased1 |  |         | Averagepricepaid per share |  |  | Remainingauthorization underthe plan |
|     |  |  | (#)                               |  |         | ($)                        |  |  | ($mil.)                              |
| October  |  |  |                                   |  | — |                            |  |  |                                      |  | — |  |  |  |  |  |   |  |
| November |  |  |                                   |  | 12,800  |                            |  |  |                                      |  | 110.88  |  |  |  |  |  |   |  |
| December |  |  |                                   |  | 59,500  |                            |  |  |                                      |  | 110.64  |  |  |  |  |  |   |  |
| Total    |  |  |                                   |  | 72,300  |                            |  |  |                                      |  | 110.69  |  |  |  |  |  | 32.0   |  |
|          |

|  |
|--|
|  |  |
|  |

|    |                                                              |
|----|--------------------------------------------------------------|
| 1. | Allshares repurchased were part of a publicly announcedplan. |

We have established a policy of declaring quarterlycash dividends on our common stock. Consistent with this policy, wehave paid common stock dividends on a quarterly basis for more than thepast six years. The Company announced in October  2006 that,commencing with its fourth quarter dividend to be paid onDecember  11,  2006, it was increasing its annual commonstock dividend by 25% to $1.25 per share from $1.00 per share.This increase in annual dividend will result in a quarterly dividendpayment of $0.3125 per share. Whether to declare dividends and theamount of dividends to be paid in the future will be reviewedperiodically by our Board of Directors in light of the Company’searnings, cash flow, financial condition, capital needs, investmentopportunities and regulatory considerations. There is no requirement orassurance that common dividends will continue to be paid.

In2001, we issued to New Mountain Partners, LP and MidOcean CapitalInvestors, LP (formerly DB Capital Partners, Inc) our Series AConvertible Redeemable Preferred Stock, the terms of which aredescribed in detail in Note 7 to the Consolidated Financial Statementsbelow. In March  2004,  3.1  million outstanding andaccrued shares of the Series A Convertible Redeemable Preferred Stockwere converted into shares of common stock on a one for one basis andsold in a secondary public offering. The Company received no proceedsfrom such offering other than $4.2  million associated withcertain management option exercises in connection with the exercise bythe underwriters of the ‘‘green shoe’’ withrespect to the secondary offering. In June  2004, the remaining875,120 outstanding and accrued shares of Series A ConvertibleRedeemable Preferred Stock were called for redemption by the Companyand in lieu of being redeemed for cash, were converted by the holdersinto 875,120 common shares in accordance with the terms of the Series Ashares. As a result, the Company has no more preferred sharesoutstanding.

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Set forth in the table below isinformation pertaining to securities authorized for issuance under ourequity compensation plans. There are options but no warrants or otherrights existing under these plans.

Equity Compensation PlanInformationas of December  31,2006

|              |  |  |                                                                                        |  |  |                                                                                                                       |  |         |                                                                                                                                         |  |         |  |   |         |  |   |       |  |  |         |  |  |         |  |
|--------------|--|--|----------------------------------------------------------------------------------------|--|--|-----------------------------------------------------------------------------------------------------------------------|--|---------|-----------------------------------------------------------------------------------------------------------------------------------------|--|---------|--|---|---------|--|---|-------|--|--|---------|--|--|---------|--|
| PlanCategory |  |  | Number of securities tobeissued upon exerciseof outstanding options,warrants andrights |  |  | Weighted average exerciseprice ofoutstandingoptions, warrants and rights                                              |  |         | Number ofsecurities remaining available for future issuance underequity compensation plans (excluding securities reflectedin column(a)) |
|         |  |  | (a)                                                                                    |  |  | (b)                                                                                                                   |  |         | (c)                                                                                                                                     |
| 1.           |  |  | Equitycompensation plans previously approved by securityholders                        |  |  |                                                                                                                       |  |    |                                                                                                                                         |  |         |  |   |    |  |   |       |  |  |    |  |
|         |  |  | A.                                                                                     |  |  | 1996Stock Option Plan as amended at the May  2001, the May2005, and the May  2006 Annual Shareholders’ Meetings |  |         |                                                                                                                                         |  | 762,334 |  |   |         |  | $ | 56.42 |  |  |         |  |  | 485,088 |  |
| 2.           |  |  | Equitycompensation plans not previously approved by security holders                   |  |  |                                                                                                                       |  | — |                                                                                                                                         |  |         |  |   | — |  |   |       |  |  | — |  |
|         |  |  | Total                                                                                  |  |  |                                                                                                                       |  | 762,334 |                                                                                                                                         |  |         |  | $ | 56.42   |  |   |       |  |  | 485,088 |  |
|              |

Item6.    Selected Financial Data.

The following table sets forth,for the periods and at the dates indicated, selected consolidatedfinancial and operating data. The financial information has beenderived from our consolidated financial statements.

Theinformation set forth below is qualified by reference to and should beread in conjunction with our consolidated financial statements andnotes thereto and ‘‘Management’s Discussion andAnalysis of Financial Condition and Results ofOperations’’ and other information included elsewhere orincorporated by reference in this Annual Report on Form10-K.

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|                                           |  |  |                                                            |   |         |      |  |  |      |   |         |      |  |  |      |   |         |  |  |  |  |   |         |  |  |  |  |   |         |  |
|-------------------------------------------|--|--|------------------------------------------------------------|---|---------|------|--|--|------|---|---------|------|--|--|------|---|---------|--|--|--|--|---|---------|--|--|--|--|---|---------|--|
|                                      |  |  | YearEnded December31,                                      |
|                                      |  |  | 2002                                                       |   |         | 2003 |  |  | 2004 |   |         | 2005 |  |  | 2006 |
|                                      |  |  | (inthousands, except per share, enrollment and campusdata) |
| IncomeStatementData:                      |  |  |                                                            |   |    |      |  |  |      |   |    |      |  |  |      |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Revenues                                  |  |  |                                                            | $ | 116,710 |      |  |  |      | $ | 147,025 |      |  |  |      | $ | 183,194 |  |  |  |  | $ | 220,507 |  |  |  |  | $ | 263,648 |  |
| Costsandexpenses:                         |  |  |                                                            |   |    |      |  |  |      |   |    |      |  |  |      |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Instructionand educationalsupport         |  |  |                                                            |   | 41,601  |      |  |  |      |   | 53,116  |      |  |  |      |   | 63,860  |  |  |  |  |   | 76,977  |  |  |  |  |   | 91,120  |  |
| Sellingandpromotion                       |  |  |                                                            |   | 16,773  |      |  |  |      |   | 22,768  |      |  |  |      |   | 29,435  |  |  |  |  |   | 41,090  |  |  |  |  |   | 52,269  |  |
| Generalandadministration                  |  |  |                                                            |   | 17,107  |      |  |  |      |   | 20,013  |      |  |  |      |   | 24,416  |  |  |  |  |   | 27,576  |  |  |  |  |   | 40,723  |  |
| Gainon sale ofasset                       |  |  |                                                            |   | — |      |  |  |      |   | 1,772   |      |  |  |      |   | — |  |  |  |  |   | — |  |  |  |  |   | — |  |
| Incomefromoperations                      |  |  |                                                            |   | 41,229  |      |  |  |      |   | 52,900  |      |  |  |      |   | 65,483  |  |  |  |  |   | 74,864  |  |  |  |  |   | 79,536  |  |
| Investmentand otherincome                 |  |  |                                                            |   | 1,775   |      |  |  |      |   | 2,420   |      |  |  |      |   | 1,595   |  |  |  |  |   | 2,982   |  |  |  |  |   | 4,542   |  |
| Secondaryofferingexpenses                 |  |  |                                                            |   | 490     |      |  |  |      |   | — |      |  |  |      |   | — |  |  |  |  |   | — |  |  |  |  |   | — |  |
| Incomebefore incometaxes                  |  |  |                                                            |   | 42,514  |      |  |  |      |   | 55,320  |      |  |  |      |   | 67,078  |  |  |  |  |   | 77,846  |  |  |  |  |   | 84,078  |  |
| Provisionfor incometaxes                  |  |  |                                                            |   | 16,730  |      |  |  |      |   | 21,646  |      |  |  |      |   | 25,838  |  |  |  |  |   | 29,781  |  |  |  |  |   | 31,771  |  |
| Netincome                                 |  |  |                                                            |   | 25,784  |      |  |  |      |   | 33,674  |      |  |  |      |   | 41,240  |  |  |  |  |   | 48,065  |  |  |  |  |   | 52,307  |  |
| Preferredstock dividends andaccretion     |  |  |                                                            |   | 7,344   |      |  |  |      |   | 5,136   |      |  |  |      |   | 1,389   |  |  |  |  |   | — |  |  |  |  |   | — |  |
| Netincome available to commonstockholders |  |  |                                                            | $ | 18,440  |      |  |  |      | $ | 28,538  |      |  |  |      | $ | 39,851  |  |  |  |  | $ | 48,065  |  |  |  |  | $ | 52,307  |  |
| Netincome pershare:                       |  |  |                                                            |   |    |      |  |  |      |   |    |      |  |  |      |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Basic                                     |  |  |                                                            | $ | 2.14    |      |  |  |      | $ | 2.67    |      |  |  |      | $ | 2.91    |  |  |  |  | $ | 3.32    |  |  |  |  | $ | 3.69    |  |
| Diluted                                   |  |  |                                                            | $ | 1.78    |      |  |  |      | $ | 2.27    |      |  |  |      | $ | 2.74    |  |  |  |  | $ | 3.26    |  |  |  |  | $ | 3.61    |  |
| Weightedaverage shares outstanding:       |  |  |                                                            |   |    |      |  |  |      |   |    |      |  |  |      |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Basic                                     |  |  |                                                            |   | 8,617   |      |  |  |      |   | 10,694  |      |  |  |      |   | 13,674  |  |  |  |  |   | 14,472  |  |  |  |  |   | 14,187  |  |
| Diluted(a)                                |  |  |                                                            |   | 14,516  |      |  |  |      |   | 14,857  |      |  |  |      |   | 15,057  |  |  |  |  |   | 14,741  |  |  |  |  |   | 14,492  |  |
| OtherData:                                |  |  |                                                            |   |    |      |  |  |      |   |    |      |  |  |      |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Depreciationandamortization               |  |  |                                                            | $ | 3,642   |      |  |  |      | $ | 4,367   |      |  |  |      | $ | 5,375   |  |  |  |  | $ | 6,619   |  |  |  |  | $ | 7,059   |  |
| Stock-basedcompensationexpense(b)         |  |  |                                                            |   | — |      |  |  |      |   | — |      |  |  |      |   | — |  |  |  |  | $ | 48      |  |  |  |  | $ | 8,049   |  |
| Capitalexpenditures                       |  |  |                                                            | $ | 17,113  | (c)  |  |  |      | $ | 6,840   |      |  |  |      | $ | 11,063  |  |  |  |  | $ | 12,275  |  |  |  |  | $ | 13,183  |  |
| Cashdividends per commonshare             |  |  |                                                            | $ | 0.26    |      |  |  |      | $ | 0.26    |      |  |  |      | $ | 0.41    |  |  |  |  | $ | 0.63    |  |  |  |  | $ | 1.06    |  |
| Enrollment(d)                             |  |  |                                                            |   | 16,532  |      |  |  |      |   | 20,138  |      |  |  |      |   | 23,539  |  |  |  |  |   | 27,305  |  |  |  |  |   | 31,372  |  |
| Campuses(e)                               |  |  |                                                            |   | 20      |      |  |  |      |   | 25      |      |  |  |      |   | 30      |  |  |  |  |   | 35      |  |  |  |  |   | 43      |  |
|                                           |

|                                                |  |  |               |   |         |      |  |  |      |   |         |      |  |  |      |   |         |  |  |  |  |   |         |  |  |  |  |   |         |  |
|------------------------------------------------|--|--|---------------|---|---------|------|--|--|------|---|---------|------|--|--|------|---|---------|--|--|--|--|---|---------|--|--|--|--|---|---------|--|
|                                           |  |  | AtDecember31, |
|                                           |  |  | 2002          |   |         | 2003 |  |  | 2004 |   |         | 2005 |  |  | 2006 |
|                                           |  |  | (inthousands) |
| BalanceSheetData:                              |  |  |               |   |    |      |  |  |      |   |    |      |  |  |      |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Cash,cash equivalents and marketablesecurities |  |  |               | $ | 67,256  |      |  |  |      | $ | 108,040 |      |  |  |      | $ | 122,757 |  |  |  |  | $ | 119,806 |  |  |  |  | $ | 128,426 |  |
| Workingcapital(f)                              |  |  |               |   | 55,901  |      |  |  |      |   | 94,760  |      |  |  |      |   | 112,726 |  |  |  |  |   | 110,886 |  |  |  |  |   | 122,204 |  |
| Totalassets                                    |  |  |               |   | 140,124 |      |  |  |      |   | 182,556 |      |  |  |      |   | 210,114 |  |  |  |  |   | 225,845 |  |  |  |  |   | 270,844 |  |
| Long-termliabilities                      |  |  |               |   | 2,055   |      |  |  |      |   | 2,894   |      |  |  |      |   | 5,784   |  |  |  |  |   | 6,569   |  |  |  |  |   | 7,689   |  |
| Totalliabilities                               |  |  |               |   | 39,942  |      |  |  |      |   | 53,892  |      |  |  |      |   | 61,192  |  |  |  |  |   | 74,005  |  |  |  |  |   | 99,317  |  |
| SeriesA convertible redeemable preferredstock  |  |  |               |   | 93,807  |      |  |  |      |   | 95,686  |      |  |  |      |   | — |  |  |  |  |   | — |  |  |  |  |   | — |  |
| Totalstockholders’equity                 |  |  |               |   | 6,375   |      |  |  |      |   | 32,978  |      |  |  |      |   | 148,922 |  |  |  |  |   | 151,840 |  |  |  |  |   | 171,527 |  |
|                                                |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                 |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a) | Dilutedweighted average shares outstanding include common shares issued andoutstanding, the assumed conversion of Series A Preferred Stock issuedin May  2001, accrued payment-in-kind dividends on and assumedconversion of the Series A Preferred Stock, the dilutive impact ofrestricted stock and outstanding stock options using the Treasury StockMethod. |

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|     |                                                                                                                                                                                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | In 2006, theCompany adopted FAS 123(R), Share-based Payment, and beganrecording expense for all forms of stock-based compensation. Prior to2006, only stock-based compensation expense for restricted stock grantswas being recorded. |

|     |                                                                                                   |
|-----|---------------------------------------------------------------------------------------------------|
| (c) | Reflects thepurchase for $12  million of three previously leased campusfacilities in January2002. |

|     |                                                                                                  |
|-----|--------------------------------------------------------------------------------------------------|
| (d) | Reflects student enrollment asof the beginning of the fall academic term for each yearindicated. |

|     |                                                                                              |
|-----|----------------------------------------------------------------------------------------------|
| (e) | Reflects number ofcampuses offering classes during the fourth quarter of each yearindicated. |

|     |                                                                                     |
|-----|-------------------------------------------------------------------------------------|
| (f) | Working capital iscalculated by subtracting current liabilities from currentassets. |

Item 7.    Management’s Discussion andAnalysis of Financial Condition and Results of Operations

Youshould read the following discussion in conjunction with‘‘Selected Historical Financial and OtherInformation,’’ our consolidated financial statements andthe notes thereto, the ‘‘Cautionary Notice RegardingForward-Looking Statements,’’ Item 1A entitled‘‘Risk Factors’’ and the other informationappearing elsewhere, or incorporated by reference, in this AnnualReport on Form 10-K.

Background and Overview

We arean education services holding company that owns Strayer University,Inc. and Education Loan Processing, Inc.(‘‘ELP’’). The University is an institutionof higher education which offers undergraduate and graduate degreeprograms at 47 campuses (including two new campuses opened for the 2007winter term enrollment and two new campuses opened for the 2007 springterm enrollment) in Pennsylvania, Delaware, Maryland, Washington, D.C.,Virginia, North Carolina, South Carolina, Tennessee, Georgia, Florida,Alabama, Kentucky, and worldwide through Strayer University Online. TheCompany is planning to open a total of eight new campuses in 2007,including four that have already been opened.

ELP was created toadminister the Company’s student loan portfolio. In 2003, theCompany sold its loan portfolio to a financial institution. ELPcontinued to originate loans for immediate sale and administered them.Now, ELP only administers existing loans and helps students obtain newloans directly from third party lenders without the Company’sorigination.

As set forth below, enrollment (measured by fallterm to fall term), full-time tuition rates, revenues, income fromoperations and net income have all increased in each of the last threeyears.

|                                      |  |  |                       |   |         |      |  |  |         |   |         |   |  |  |  |   |         |   |
|--------------------------------------|--|--|-----------------------|---|---------|------|--|--|---------|---|---------|---|--|--|--|---|---------|---|
|                                 |  |  | YearEnded December31, |
|                                 |  |  | 2004                  |   |         | 2005 |  |  | 2006(a) |
| Fallterm enrollment                  |  |  |                       |   | 23,539  |      |  |  |         |   | 27,305  |   |  |  |  |   | 31,372  |   |
| %Change from prior year              |  |  |                       |   | 17      | %    |  |  |         |   | 16      | % |  |  |  |   | 15      | % |
| Full-timetuition (per course)        |  |  |                       | $ | 1,096   |      |  |  |         | $ | 1,152   |   |  |  |  | $ | 1,215   |   |
| %Change from prior year              |  |  |                       |   | 5       | %    |  |  |         |   | 5       | % |  |  |  |   | 5       | % |
| Revenues(in thousands)               |  |  |                       | $ | 183,194 |      |  |  |         | $ | 220,507 |   |  |  |  | $ | 263,648 |   |
| %Change from prior year              |  |  |                       |   | 25      | %    |  |  |         |   | 20      | % |  |  |  |   | 20      | % |
| Incomefrom operations (in thousands) |  |  |                       | $ | 65,483  |      |  |  |         | $ | 74,864  |   |  |  |  | $ | 79,536  |   |
| %Change from prior year              |  |  |                       |   | 24      | %    |  |  |         |   | 14      | % |  |  |  |   | 6       | % |
| Netincome (in thousands)             |  |  |                       | $ | 41,240  |      |  |  |         | $ | 48,065  |   |  |  |  | $ | 52,307  |   |
| %Change from prior year              |  |  |                       |   | 22      | %    |  |  |         |   | 17      | % |  |  |  |   | 9       | % |
| Dilutednet income per share          |  |  |                       | $ | 2.74    |      |  |  |         | $ | 3.26    |   |  |  |  | $ | 3.61    |   |
| %Change from prior year              |  |  |                       |   | 21      | %    |  |  |         |   | 19      | % |  |  |  |   | 11      | % |
|                                      |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                          |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a) | In2006, the Company adopted FAS 123(R) related to stock-basedcompensation and began recording stock-based compensation expense forall forms of stock-based compensation. |

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Strayer University derives approximately97% of its revenue from tuition collected from its students. Theacademic year of the University is divided into four quarters, whichapproximately coincide with the four quarters of the calendar year.Students make payment arrangements for the tuition for each courseprior to the beginning of the quarter. When students register forcourses, tuition is recorded as unearned tuition, and is recognized inthe quarter of instruction. If a student withdraws from a course priorto completion, the University refunds a portion of the tuitiondepending on when the withdrawal occurs. Tuition revenue is shown netof any refunds, withdrawals, corporate discounts, employee tuitiondiscounts and scholarships. The University also derives revenue fromother sources such as textbook-related income, application fees,commencement fees, placement test fees, withdrawal fees, loanadministration fees, and other income, which are all recognized whenincurred.

At the time of registration, unearned tuition (aliability) is recorded for academic services to be provided and atuition receivable is recorded for the portion of the tuition not paidupfront in cash. Because the University’s academic quarterscoincide with the calendar quarters, tuition receivable at the end ofany calendar quarter largely represents student tuition due for thefollowing academic quarter. Based upon past experience and judgment,the University establishes an allowance for doubtful accounts withrespect to accounts receivable not included in unearned tuition. Anyuncollected account more than six months past due for students who haveleft the University is charged against the allowance. Our bad debtexpense as a percentage of revenue for the years ended December31,  2004, 2005 and 2006 was 2.3%, 2.5% and2.9%, respectively.

Strayer University’s expensesconsist of instruction and educational support expenses, selling andpromotion expenses, and general and administration expenses.Instruction and educational support expenses generally contain items ofexpense directly attributable to the educational activity of theUniversity. This expense category includes salaries and benefits offaculty and academic administrators and, beginning in 2006, stock-basedcompensation expense. Instruction and educational support expenses alsoinclude costs of educational supplies and facilities, including rentfor campus facilities, certain costs of establishing and maintainingcomputer laboratories and all other physical plant and occupancy costs,with the exception of costs attributable to the corporateoffices.

Selling and promotion expenses include salaries,benefits and, beginning in 2006, stock-based compensation expense ofpersonnel engaged in recruitment, admissions, retention, promotion anddevelopment, as well as costs of advertising and production ofmarketing materials.

General and administration expenses includesalaries, benefits and, beginning in 2006, stock-based compensationexpense of management and employees engaged in student services,accounting, human resources, compliance and other corporate functions,along with the occupancy costs attributable to such functions. Bad debtexpense is also included as a general and administration expense.

Investment and other income consists primarily of earnings andrealized gains or losses on investments.

Critical AccountingPolicies and Estimates

‘‘Management’sDiscussion and Analysis of Financial Condition and Results ofOperations’’ discusses our consolidated financialstatements, which have been prepared in accordance with accountingprinciples generally accepted in the United States of America. Thepreparation of these consolidated financial statements requiresmanagement to make estimates and judgments that affect the reportedamounts of assets, liabilities, revenues and expenses and the relateddisclosures of contingent assets and liabilities. On an ongoing basis,management evaluates its estimates and judgments related to itsallowance for uncollectible accounts, income tax provisions, valuationof deferred tax assets, forfeiture rates for stock-based compensationplans and accrued expenses. Management bases its estimates andjudgments on historical experience and various other factors andassumptions that are believed to be reasonable under the circumstances,the results of which form the basis for making judgments regarding thecarrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimatesunder different assumptions or conditions.

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Management believes that the followingcritical accounting policies are its more significant judgments andestimates used in the preparation of its consolidated financialstatements. Tuition revenue is deferred at the time of registration andis recognized as income, net of any refunds or withdrawals, in therespective quarter of instruction. Advance registrations for the nextquarter are recorded as unearned tuition. We record estimates for ourallowance for uncollectible accounts for tuition receivable fromstudents. If the financial condition of our students were todeteriorate, resulting in impairment of their ability to make requiredpayments for tuition payable to us, additional allowances may berequired. We record estimates for our accrued expenses and income taxliabilities. We periodically review our assumed forfeiture rates forstock-based awards and adjust them as necessary. Should actual resultsdiffer from our estimates, revisions to our accrued expenses,stock-based compensation expenses, and income tax liabilities may berequired.

New Campuses

The Company’s goal is toserve the demand for post secondary adult education nationwide byopening new campuses every year. A new campus typically requires up to$1  million in upfront capital costs for leasehold improvements,furniture and fixtures, and computer equipment. In the first year ofoperation, assuming a midyear opening, the Company expects to incuroperating losses of approximately $1  million includingdepreciation related to the upfront capital costs. A new campus istypically expected to begin generating operating income on a quarterlybasis after four to six quarters of operation, which is generally uponreaching an enrollment level of about 300 students. TheCompany’s new campus notional model assumes an increase ofaverage enrollment by 100-150 students per year until reaching a levelof about 1,000 students. Given the potential internal rate of returnachieved with each new campus (an estimated 70%), opening newcampuses is an important part of the Company’s strategy. TheCompany believes it has sufficient capital resources from cash, cashequivalents, marketable securities and cash generated from operatingactivities to continue to open new campuses for at least the next 12months.

The Company plans to open eight new campuses in 2007including four already opened. In 2006, the Company opened eight newcampuses. The Company opened five new campuses in each of the precedingthree years. See ‘‘New Campuses Opened’’table in Item 1 for information regarding the locations of these newcampuses.

Results of Operations

In 2006, the Companygenerated $263.6  million in revenue, a 20% increasecompared to 2005, primarily as a result of average enrollment growth of15% and a 5% tuition increase which commenced inJanuary  2006. Income from operations was $79.5  millionfor 2006, an increase of 6% compared to 2005. In 2006, theCompany began recording stock-based compensation expense which amountedto $8.1  million before tax for the year ended December31,  2006. Net income in 2006 was $52.3  million, anincrease of 9% compared to 2005. Net income for the year endedDecember  31,  2006 includes the effect of a $5.1million after tax expense related to stock-based compensation. Earningsper diluted share was $3.61 in 2006 compared to $3.26 in 2005, anincrease of 11%. Diluted earnings per share for the year endedDecember  31,  2006 includes the effect of a $0.35 pershare after tax expense related to stock-based compensation.

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The following table sets forth certainincome statement data as a percentage of revenues for the periodsindicated:

|                                    |  |  |                       |  |        |      |  |  |      |  |        |   |  |  |  |  |        |   |
|------------------------------------|--|--|-----------------------|--|--------|------|--|--|------|--|--------|---|--|--|--|--|--------|---|
|                               |  |  | YearEnded December31, |
|                               |  |  | 2004                  |  |        | 2005 |  |  | 2006 |
| Revenues                           |  |  |                       |  | 100.0  | %    |  |  |      |  | 100.0  | % |  |  |  |  | 100.0  | % |
| Costsandexpenses:                  |  |  |                       |  |   |      |  |  |      |  |   |   |  |  |  |  |   |   |
| Instructionand educational support |  |  |                       |  | 34.9   |      |  |  |      |  | 34.9   |   |  |  |  |  | 34.6   |   |
| Sellingand promotion               |  |  |                       |  | 16.1   |      |  |  |      |  | 18.6   |   |  |  |  |  | 19.8   |   |
| Generaland administration          |  |  |                       |  | 13.3   |      |  |  |      |  | 12.5   |   |  |  |  |  | 15.4   |   |
| Incomefrom operations              |  |  |                       |  | 35.7   |      |  |  |      |  | 34.0   |   |  |  |  |  | 30.2   |   |
| Investmentand other income         |  |  |                       |  | 0.9    |      |  |  |      |  | 1.3    |   |  |  |  |  | 1.7    |   |
| Incomebefore income taxes          |  |  |                       |  | 36.6   |      |  |  |      |  | 35.3   |   |  |  |  |  | 31.9   |   |
| Provisionfor income taxes          |  |  |                       |  | 14.1   |      |  |  |      |  | 13.5   |   |  |  |  |  | 12.1   |   |
| Netincome                          |  |  |                       |  | 22.5   | %    |  |  |      |  | 21.8   | % |  |  |  |  | 19.8   | % |
| Taxrate                            |  |  |                       |  | 38.5   | %    |  |  |      |  | 38.3   | % |  |  |  |  | 37.8   | % |
|                                    |

YearEnded December  31,  2006 Compared To Year EndedDecember  31,2005

Enrollment.    Average enrollment increased15% from 23,903 students for the year ended December31,  2005 to 27,554 students for the same period in 2006. Thisgrowth is principally due to new campus openings, stable growth in ourmature markets and the rapid growth in markets outside of commutingdistance to a Strayer University physical campus served by StrayerUniversity Online.

Revenues.    Revenues increased20% from $220.5  million in 2005 to $263.6  millionin 2006 principally due to a 15% increase in the averageenrollment and a 5% tuition increase which commenced inJanuary  2006.

Instruction and educational supportexpenses.    Instruction and educational support expensesincreased $14.1  million, or 18%, from $77.0million in 2005 to $91.1  million in 2006. This increase wasprincipally due to direct costs necessary to support the increase instudent enrollments including faculty compensation, related academicstaff salaries, and campus facility costs which increased $4.7million, $3.0  million, and $2.9  million, respectively.The increase is also partly attributable to $0.6  million instock-based compensation expense which the Company began recording in2006. These costs as a percentage of revenues decreased slightly to34.6% in 2006 from 34.9% in 2005.

Selling andpromotion expenses.    Selling and promotion expenses increased$11.2  million, or 27%, from $41.1  million in 2005to $52.3  million in 2006. This increase was principally due tothe direct costs required to generate leads for enrollment growth, theaddition of admissions personnel, particularly at new campuses and atStrayer University Online, the increase in the number of new campusesopened in 2006 compared to 2005 (eight, up from five in 2005) andstock-based compensation expense. These expenses as a percentage ofrevenues increased from 18.6% in 2005 to 19.8% in 2006largely attributable to both marketing costs and staffing costs growingfaster than tuition revenue, as the Company has increased the number ofnew campuses opened.

General and administrationexpenses.    General and administration expenses increased$13.1  million, or 48%, from $27.6  million in 2005to $40.7  million in 2006. The increase is largely attributableto $6.9  million of stock-based compensation expense which theCompany began recording in 2006. This increase was also due toincreased employee compensation and related expenses at both corporateand campus locations and higher bad debt expense, each increasing by$2.2  million. General and administration expenses as apercentage of revenues increased to 15.4% in 2006 from12.5% in 2005 primarily due to the inclusion of stock-basedcompensation.

Income from operations.    Income fromoperations increased $4.6  million, or 6%, from$74.9  million in 2005 to $79.5  million in 2006 due to theaforementioned factors.

Investment and otherincome.    Investment and other income increased $1.5million, or 52%, from $3.0  million in 2005 to $4.5million in 2006. This increase was principally due to higher yieldsfrom the 

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Company’s investments in a short-termtax-exempt bond fund and tax-exempt money market funds. In addition, ahigher average cash balance in 2006 partly contributed to thisincrease.

Provision for income taxes.    Income taxexpense increased $2.0  million, or 7%, from $29.8million in 2005 to $31.8  million in 2006 primarily due to theincrease in income before taxes attributable to the factors discussedabove. This was partly offset by a lower effective tax rate of37.8% in 2006, compared to 38.3% in 2005, resultingprimarily from higher income from tax-exempt securities.

Netincome.    Net income increased $4.2  million, or9%, from $48.1  million in 2005 to $52.3  million in2006 because of the factors discussed above.

Year EndedDecember  31,  2005 Compared To Year Ended December31,  2004

Enrollment.    Average enrollmentincreased 18% from 20,340 students for the year endedDecember  31,  2004 to 23,903 students for the same periodin 2005. This growth is principally due to new campus openings, stablegrowth in our mature markets and the rapid growth in markets outside ofcommuting distance to a Strayer University physical campus served byStrayer University Online.

Revenues.    Revenuesincreased 20% from $183.2  million in 2004 to$220.5  million in 2005 principally due to a 18% increasein the average enrollment. Although tuition increased 5% in2005, revenue per student increased only 2%, affected by a mixshift to graduate students who, on average, take fewer classes thanundergraduate students.

Instruction and educational supportexpenses.    Instruction and educational support expensesincreased $13.1  million, or 21%, from $63.9million in 2004 to $77.0  million in 2005. This increase wasprincipally due to direct costs necessary to support the increase instudent enrollments including faculty compensation, related academicstaff salaries, and campus facility costs which increased $4.5million, $3.1  million, and $3.0  million, respectively.These costs as a percentage of revenues were 34.9% in 2005 aswell as in 2004.

Selling and promotionexpenses.    Selling and promotion expenses increased$11.7  million, or 40%, from $29.4  million in 2004to $41.1  million in 2005. This increase was principally due tothe direct costs required to generate leads for enrollment growth andthe addition of admissions personnel, particularly at new campuses andat Strayer University Online. These expenses as a percentage ofrevenues increased from 16.1% in 2004 to 18.6% in 2005largely attributable to both marketing costs and staffing costs growingfaster than tuition revenue, as the Company prepared to open anincreased number of new campuses in 2006.

General andadministration expenses.    General and administration expensesincreased $3.2  million, or 13%, from $24.4  millionin 2004 to $27.6  million in 2005. This increase was principallydue to increased employee compensation and related expenses at bothcorporate and campus locations and higher bad debt expense, whichincreased $0.7  million and $1.3  million, respectively.General and administration expenses as a percentage of revenuesdecreased slightly to 12.5% in 2005 from 13.3% in 2004primarily due to greater revenues being spread over the largely fixedcosts of various centralized functions.

Income fromoperations.    Income from operations increased $9.4million, or 14%, from $65.5  million in 2004 to$74.9  million in 2005 due to the aforementionedfactors.

Investment and other income.    Investmentand other income increased $1.4  million, or 87%, from$1.6  million in 2004 to $3.0  million in 2005. Thisincrease was principally due to higher yields from the Company’sinvestments in a short-term tax-exempt bond fund and tax-exempt moneymarket funds.

Provision for income taxes.    Incometax expense increased $4.0  million, or 15%, from$25.8  million in 2004 to $29.8  million in 2005 primarilydue to the increase in income before taxes attributable to the factorsdiscussed above. This was partly offset by a lower effective tax rateof 38.3% in 2005, compared to 38.5% in 2004, resultingprimarily from higher income from tax-exempt securities.

Netincome.    Net income increased $6.9  million, or16.6%, from $41.2  million in 2004 to $48.1  millionin 2005 because of the factors discussed above.

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Seasonality

Our quarterly resultsof operations tend to vary significantly within a year because ofstudent enrollment patterns. Enrollment generally is highest in thefourth quarter, or fall term, and lowest in the third quarter, orsummer term. In 2006, enrollments by term were as follows:

2006Enrollment byTerm

|         |  |  |            |  |        |  |
|---------|--|--|------------|--|--------|--|
| Term    |  |  | Enrollment |
| Winter  |  |  |            |  | 27,621 |  |
| Spring  |  |  |            |  | 27,289 |  |
| Summer  |  |  |            |  | 23,932 |  |
| Fall    |  |  |            |  | 31,372 |  |
| Average |  |  |            |  | 27,554 |  |
|         |

Thefollowing table sets forth our revenues on a quarterly basis for theyears ended December  31,  2004, 2005 and2006:

Quarterly Revenues(dollars inthousands)

|                  |  |  |        |   |         |         |  |  |        |  |     |         |  |  |        |   |         |         |  |  |  |  |     |   |  |  |  |   |         |  |  |  |  |  |     |   |
|------------------|--|--|--------|---|---------|---------|--|--|--------|--|-----|---------|--|--|--------|---|---------|---------|--|--|--|--|-----|---|--|--|--|---|---------|--|--|--|--|--|-----|---|
|             |  |  | 2004   |   |         | 2005    |  |  | 2006   |
| ThreeMonthsEnded |  |  | Amount |   |         | Percent |  |  | Amount |  |     | Percent |  |  | Amount |   |         | Percent |
| March31          |  |  |        | $ | 46,106  |         |  |  |        |  | 25  | %       |  |  |        | $ | 56,153  |         |  |  |  |  | 26  | % |  |  |  | $ | 67,090  |  |  |  |  |  | 25  | % |
| June30           |  |  |        |   | 46,811  |         |  |  |        |  | 26  |         |  |  |        |   | 55,249  |         |  |  |  |  | 25  |   |  |  |  |   | 65,558  |  |  |  |  |  | 25  |   |
| September30      |  |  |        |   | 38,009  |         |  |  |        |  | 21  |         |  |  |        |   | 47,087  |         |  |  |  |  | 21  |   |  |  |  |   | 56,693  |  |  |  |  |  | 22  |   |
| December31       |  |  |        |   | 52,268  |         |  |  |        |  | 28  |         |  |  |        |   | 62,018  |         |  |  |  |  | 28  |   |  |  |  |   | 74,307  |  |  |  |  |  | 28  |   |
| Totalfor Year    |  |  |        | $ | 183,194 |         |  |  |        |  | 100 | %       |  |  |        | $ | 220,507 |         |  |  |  |  | 100 | % |  |  |  | $ | 263,648 |  |  |  |  |  | 100 | % |
|                  |

Costsgenerally are not affected by the seasonal factors as much asenrollment and revenue, and do not vary significantly on a quarterlybasis.

Liquidity and Capital Resources

AtDecember  31,  2006, the Company had cash, cash equivalentsand marketable securities of $128.4  million compared to$119.8  million at December  31,  2005. Most of theCompany’s excess cash is invested in tax-exempt money marketfunds and a diversified, short-term, investment grade, tax-exempt bondfund to minimize the Company’s principal risk and to benefitfrom the tax efficiency of the funds’ underlying securities. Asof December  31,  2006, the Company had a total of$75.7  million invested in the short-term, tax-exempt bond fund,having added $30  million to it in the first quarter of 2006. AtDecember  31,  2006, the 429 issues in this fund had anaverage credit rating of AA, an average maturity and an averageduration of 1.2 years, as well as an average yield to maturity of3.8%. We had no debt as of December  31,  2006 orDecember  31,  2005.

For the year endedDecember  31,  2006, the Company generated $61.8million net cash from operating activities compared to $55.1million for the same period in 2005. Capital expenditures were$13.2  million for the year ended December  31,  2006compared to $12.3  million for the same period in 2005. Capitalexpenditures for the year ending December  31,  2007 areexpected to be in the range of $15-18  million inclusive of theexpected openings of eight new campuses. For the year endedDecember  31,  2006, we paid $15.3  million in cashdividends to our common stockholders and spent $35.0  millionrepurchasing our common shares in the open market.

In 2006, baddebt expense as a percentage of revenue was 2.9% compared to2.5% for the same period in 2005. Days sales outstanding,adjusted to exclude tuition receivable related to future quarters, was13 days at the end of the fourth quarter 2006 compared to 10 days in2005. This increase was partly attributable to the growth of corporatesponsored students which tend to receive extended paymentterms.

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Currently, the Company invests its cashin bank overnight deposits, money market funds and a short-termtax-exempt bond fund. In addition, the Company has available two$10.0  million credit facilities from two banks. There have beenno borrowings by the Company under these credit facilities. The Companybelieves that existing cash, cash equivalents, and marketablesecurities, cash generated from operating activities, and if necessary,cash borrowed under the credit facilities, will be sufficient to meetthe Company’s requirements for at least the next 12months.

The table below sets forth the Company’s cash andcash equivalents and marketable securities as of December31,  2004, 2005 and 2006:

Cash and MarketableSecurities(inmillions)

|                                            |  |  |               |   |       |      |  |  |      |   |       |  |  |  |  |   |       |  |
|--------------------------------------------|--|--|---------------|---|-------|------|--|--|------|---|-------|--|--|--|--|---|-------|--|
|                                       |  |  | AtDecember31, |
|                                       |  |  | 2004          |   |       | 2005 |  |  | 2006 |
| Cashand cash equivalents                   |  |  |               | $ | 97.0  |      |  |  |      | $ | 74.2  |  |  |  |  | $ | 52.7  |  |
| Marketablesecurities (short-term bondfund) |  |  |               |   | 25.8  |      |  |  |      |   | 45.6  |  |  |  |  |   | 75.7  |  |
| Total                                      |  |  |               | $ | 122.8 |      |  |  |      | $ | 119.8 |  |  |  |  | $ | 128.4 |  |
|                                            |

|                            |  |  |                       |   |     |      |  |  |      |   |     |  |  |  |  |   |     |  |
|----------------------------|--|--|-----------------------|---|-----|------|--|--|------|---|-----|--|--|--|--|---|-----|--|
|                       |  |  | YearEnded December31, |
|                       |  |  | 2004                  |   |     | 2005 |  |  | 2006 |
| Investmentand other income |  |  |                       | $ | 1.6 |      |  |  |      | $ | 3.0 |  |  |  |  | $ | 4.5 |  |
|                            |

Thetable below sets forth our contractual commitments associated withoperating leases as of December  31,2006:

|                 |  |  |                                     |   |         |                |  |  |           |   |        |           |  |  |                 |   |        |  |  |  |  |   |        |  |  |  |  |   |        |  |
|-----------------|--|--|-------------------------------------|---|---------|----------------|--|--|-----------|---|--------|-----------|--|--|-----------------|---|--------|--|--|--|--|---|--------|--|--|--|--|---|--------|--|
|            |  |  | PaymentsDue By Period (inthousands) |
|            |  |  | Total                               |   |         | Lessthan 1Year |  |  | 1-3 Years |   |        | 3-5 Years |  |  | More than5Years |
| Operatingleases |  |  |                                     | $ | 109,227 |                |  |  |           | $ | 13,941 |           |  |  |                 | $ | 29,384 |  |  |  |  | $ | 26,604 |  |  |  |  | $ | 39,298 |  |
|                 |

Impactof Inflation

Inflation has not had a significant impact on theCompany’s historical operations.

Off-Balance SheetArrangements

As of December  31,  2006, the Companydoes not have any off-balance sheet arrangements as defined by Item303(a)(4) of the Securities Exchange Commission RegulationS-K.

Item 7A.    Quantitative and Qualitative Disclosuresabout Market Risk

The Company is subject to the impact ofinterest rate changes and may be subject to changes in the marketvalues of its current and future investments. The Company invests itsexcess cash in bank overnight deposits, money market funds and ashort-term tax-exempt bond fund. The Company has not used derivativefinancial instruments in its investment portfolio.

Earnings frominvestments in bank overnight deposits, money market mutual funds andshort-term tax-exempt bond funds may be adversely affected in thefuture should interest rates change. The Company’s futureinvestment income may fall short of expectations due to changes ininterest rates or the Company may suffer losses in principal if forcedto sell securities that have declined in market value due to changes ininterest rates. As of December  31,  2006, a 10%increase or decline in interest rates will not have a material impacton the Company’s future earnings, fair values or cash flowsrelated to investments in cash equivalents or interest earningmarketable securities.

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Item8.    Financial Statements and Supplementary Data

INDEX TOCONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                       |  |  |        |
|-----------------------------------------------------------------------------------------------------------------------|--|--|--------|
|                                                                                                                  |  |  | Page   |
| StrayerEducation,Inc.                                                                                                 |  |  |   |
| Reportof Independent Registered Public AccountingFirm                                                                 |  |  | 44     |
| ConsolidatedBalance Sheets as of December  31,  2005 and2006                                                          |  |  | 46     |
| Consolidated Statementsof Income for each of the three years in the period endedDecember  31,2006                     |  |  | 47     |
| Consolidated Statementsof Comprehensive Income for each of the three years in the period endedDecember  31,2006       |  |  | 47     |
| Consolidated Statementsof Stockholders’ Equity for each of the three years in the periodended December  31,2006 |  |  | 48     |
| Consolidated Statementsof Cash Flows for each of the three years in the period endedDecember  31,2006                 |  |  | 49     |
| Notesto Consolidated FinancialStatements                                                                              |  |  | 50     |
| ScheduleII-Valuation and QualifyingAccounts                                                                           |  |  | 64     |
|                                                                                                                       |

All other schedules areomitted because they are not applicable or the required information isincluded in the consolidated financial statements or notesthereto.

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Report of Independent Registered PublicAccounting Firm

To Board of Directors andStockholdersStrayer Education, Inc.

We have completedintegrated audits of Strayer Education, Inc.’s consolidatedfinancial statements and of its internal control over financialreporting as of December  31,  2006, in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates). Our opinions, based on our audits, are presentedbelow.

Consolidated financial statements andfinancial statement schedule

In our opinion, theconsolidated financial statements listed in the accompanying indexpresent fairly, in all material respects, the financial position ofStrayer Education, Inc. and its subsidiaries at December31,  2006 and 2005, and the results of their operations and theircash flows for each of the three years in the period endedDecember  31,  2006 in conformity with accountingprinciples generally accepted in the United States of America. Inaddition, in our opinion, the financial statement schedule listed inthe accompanying index presents fairly, in all material respects, theinformation set forth therein when read in conjunction with the relatedconsolidated financial statements. These financial statements andfinancial statement schedule are the responsibility of theCompany’s management. Our responsibility is to express anopinion on these financial statements and financial statement schedulebased on our audits. We conducted our audits of these statements inaccordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit offinancial statements includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates madeby management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis forour opinion.

As discussed in Note 2 to the consolidatedfinancial statements, the Company changed the manner in which itaccounts for share-based compensation in2006.

Internal control over financialreporting

Also, in our opinion, management’sassessment, included in Management’s Report on Internal ControlOver Financial Reporting appearing under Item 9A, that the Companymaintained effective internal control over financial reporting as ofDecember  31,  2006 based on criteria established inInternal Control – Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission(COSO), is fairly stated, in all material respects, based on thosecriteria. Furthermore, in our opinion, the Company maintained, in allmaterial respects, effective internal control over financial reportingas of December  31,  2006, based on criteria established inInternal Control – Integrated Framework issued by theCOSO. The Company’s management is responsible for maintainingeffective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financialreporting. Our responsibility is to express opinions onmanagement’s assessment and on the effectiveness of theCompany’s internal control over financial reporting based on ouraudit. We conducted our audit of internal control over financialreporting in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance aboutwhether effective internal control over financial reporting wasmaintained in all material respects. An audit of internal control overfinancial reporting includes obtaining an understanding of internalcontrol over financial reporting, evaluating management’sassessment, testing and evaluating the design and operatingeffectiveness of internal control, and performing such other proceduresas we consider necessary in the circumstances. We believe that ouraudit provides a reasonable basis for our opinions.

Acompany’s internal control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financialreporting includes those policies and procedures that(i) pertain to the maintenance of records that, in reasonabledetail, accurately and fairly reflect the transactions and

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dispositions of the assets of the company;(ii) provide reasonable assurance that transactions are recordedas necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and thatreceipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of thecompany; and (iii) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, ordisposition of the company’s assets that could have a materialeffect on the financial statements.

Because of itsinherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controlsmay become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures maydeteriorate.

PricewaterhouseCoopersLLPMcLean, VirginiaFebruary  26,2007

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STRAYEREDUCATION, INC.CONSOLIDATED BALANCE SHEETS(in thousands,except share and per sharedata)

|                                                                                                                                                                 |  |  |             |   |         |      |  |  |  |   |         |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|-------------|---|---------|------|--|--|--|---|---------|---|
|                                                                                                                                                            |  |  | December31, |
| ASSETS                                                                                                                                                          |  |  | 2005        |   |         | 2006 |
| Currentassets:                                                                                                                                                  |  |  |             |   |    |      |  |  |  |   |    |   |
| Cash and cashequivalents                                                                                                                                        |  |  |             | $ | 74,212  |      |  |  |  | $ | 52,663  |   |
| Marketablesecurities available for sale, at fair value                                                                                                          |  |  |             |   | 45,594  |      |  |  |  |   | 75,763  |   |
| Tuitionreceivable, net of allowances for doubtful accounts of $1,927 and$3,029 in 2005 and 2006, respectively                                                   |  |  |             |   | 55,935  |      |  |  |  |   | 80,753  |   |
| Other currentassets                                                                                                                                             |  |  |             |   | 2,581   |      |  |  |  |   | 4,653   |   |
| Totalcurrentassets                                                                                                                                              |  |  |             |   | 178,322 |      |  |  |  |   | 213,832 |   |
| Property andequipment, net                                                                                                                                      |  |  |             |   | 46,684  |      |  |  |  |   | 52,748  |   |
| Deferred income taxes                                                                                                                                           |  |  |             |   | — |      |  |  |  |   | 3,400   |   |
| Restrictedcash                                                                                                                                                  |  |  |             |   | 500     |      |  |  |  |   | 500     |   |
| Other assets                                                                                                                                                    |  |  |             |   | 339     |      |  |  |  |   | 364     |   |
| Totalassets                                                                                                                                                     |  |  |             | $ | 225,845 |      |  |  |  | $ | 270,844 |   |
| LIABILITIESAND STOCKHOLDERS’ EQUITY                                                                                                                       |  |  |             |   |    |      |  |  |  |   |    |   |
| Currentliabilities:                                                                                                                                             |  |  |             |   |    |      |  |  |  |   |    |   |
| Accountspayable                                                                                                                                                 |  |  |             | $ | 6,402   |      |  |  |  | $ | 10,923  |   |
| Accruedexpenses                                                                                                                                                 |  |  |             |   | 1,483   |      |  |  |  |   | 1,830   |   |
| Incometaxes payable                                                                                                                                             |  |  |             |   | 3,773   |      |  |  |  |   | 4,979   |   |
| Unearned tuition                                                                                                                                                |  |  |             |   | 55,778  |      |  |  |  |   | 73,896  |   |
| Totalcurrent liabilities                                                                                                                                        |  |  |             |   | 67,436  |      |  |  |  |   | 91,628  |   |
| Deferred income taxes                                                                                                                                           |  |  |             |   | 205     |      |  |  |  |   | — |   |
| Long-term liabilities                                                                                                                                           |  |  |             |   | 6,364   |      |  |  |  |   | 7,689   |   |
| Totalliabilities                                                                                                                                                |  |  |             |   | 74,005  |      |  |  |  |   | 99,317  |   |
| Commitmentsandcontingencies                                                                                                                                     |  |  |             |   |    |      |  |  |  |   |    |   |
| Stockholders’equity:                                                                                                                                      |  |  |             |   |    |      |  |  |  |   |    |   |
| Common stock, parvalue $.01; 20,000,000 shares authorized; 14,292,249 and14,293,584 shares issued and outstanding as of December31,  2005 and 2006,respectively |  |  |             |   | 143     |      |  |  |  |   | 141     |   |
| Additionalpaid-incapital                                                                                                                                   |  |  |             |   | 104,923 |      |  |  |  |   | 87,487  |   |
| Retainedearnings                                                                                                                                                |  |  |             |   | 47,020  |      |  |  |  |   | 84,043  |   |
| Accumulatedother comprehensive income(loss)                                                                                                                     |  |  |             |   | (246    | )    |  |  |  |   | (144    | ) |
| Totalstockholders’equity                                                                                                                                  |  |  |             |   | 151,840 |      |  |  |  |   | 171,527 |   |
| Totalliabilities and stockholders’equity                                                                                                                  |  |  |             | $ | 225,845 |      |  |  |  | $ | 270,844 |   |
|                                                                                                                                                                 |

Theaccompanying notes are an integral part of these consolidated financialstatements.

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STRAYER EDUCATION, INC.CONSOLIDATEDSTATEMENTS OF INCOME(in thousands, except per sharedata)

|                                            |  |  |                              |   |         |      |  |  |      |   |         |  |  |  |  |   |         |  |
|--------------------------------------------|--|--|------------------------------|---|---------|------|--|--|------|---|---------|--|--|--|--|---|---------|--|
|                                       |  |  | Forthe Year EndedDecember31, |
|                                       |  |  | 2004                         |   |         | 2005 |  |  | 2006 |
| Revenues                                   |  |  |                              | $ | 183,194 |      |  |  |      | $ | 220,507 |  |  |  |  | $ | 263,648 |  |
| Costsandexpenses:                          |  |  |                              |   |    |      |  |  |      |   |    |  |  |  |  |   |    |  |
| Instructionand educational support         |  |  |                              |   | 63,860  |      |  |  |      |   | 76,977  |  |  |  |  |   | 91,120  |  |
| Sellingand promotion                       |  |  |                              |   | 29,435  |      |  |  |      |   | 41,090  |  |  |  |  |   | 52,269  |  |
| Generaland administration                  |  |  |                              |   | 24,416  |      |  |  |      |   | 27,576  |  |  |  |  |   | 40,723  |  |
| Incomefrom operations                      |  |  |                              |   | 65,483  |      |  |  |      |   | 74,864  |  |  |  |  |   | 79,536  |  |
| Investmentand other income                 |  |  |                              |   | 1,595   |      |  |  |      |   | 2,982   |  |  |  |  |   | 4,542   |  |
| Incomebefore income taxes                  |  |  |                              |   | 67,078  |      |  |  |      |   | 77,846  |  |  |  |  |   | 84,078  |  |
| Provisionfor income taxes                  |  |  |                              |   | 25,838  |      |  |  |      |   | 29,781  |  |  |  |  |   | 31,771  |  |
| Netincome                                  |  |  |                              | $ | 41,240  |      |  |  |      | $ | 48,065  |  |  |  |  | $ | 52,307  |  |
| Preferredstock dividends and accretion     |  |  |                              |   | 1,389   |      |  |  |      |   | — |  |  |  |  |   | — |  |
| Netincome available to common stockholders |  |  |                              | $ | 39,851  |      |  |  |      | $ | 48,065  |  |  |  |  | $ | 52,307  |  |
| Netincome pershare:                        |  |  |                              |   |    |      |  |  |      |   |    |  |  |  |  |   |    |  |
| Basic                                      |  |  |                              | $ | 2.91    |      |  |  |      | $ | 3.32    |  |  |  |  | $ | 3.69    |  |
| Diluted                                    |  |  |                              | $ | 2.74    |      |  |  |      | $ | 3.26    |  |  |  |  | $ | 3.61    |  |
| Weightedaverage sharesoutstanding:         |  |  |                              |   |    |      |  |  |      |   |    |  |  |  |  |   |    |  |
| Basic                                      |  |  |                              |   | 13,674  |      |  |  |      |   | 14,472  |  |  |  |  |   | 14,187  |  |
| Diluted                                    |  |  |                              |   | 15,057  |      |  |  |      |   | 14,741  |  |  |  |  |   | 14,492  |  |
|                                            |

STRAYEREDUCATION, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVEINCOME(inthousands)

|                                                       |  |  |                              |   |        |      |  |  |      |   |        |   |  |  |  |   |        |  |
|-------------------------------------------------------|--|--|------------------------------|---|--------|------|--|--|------|---|--------|---|--|--|--|---|--------|--|
|                                                  |  |  | Forthe Year EndedDecember31, |
|                                                  |  |  | 2004                         |   |        | 2005 |  |  | 2006 |
| Net income                                            |  |  |                              | $ | 41,240 |      |  |  |      | $ | 48,065 |   |  |  |  | $ | 52,307 |  |
| Othercomprehensiveincome:                             |  |  |                              |   |   |      |  |  |      |   |   |   |  |  |  |   |   |  |
| Unrealizedgains (losses) on investments, net of taxes |  |  |                              |   | (102   | )    |  |  |      |   | (95    | ) |  |  |  |   | 102    |  |
| Comprehensiveincome                                   |  |  |                              | $ | 41,138 |      |  |  |      | $ | 47,970 |   |  |  |  | $ | 52,409 |  |
|                                                       |

Theaccompanying notes are an integral part of these consolidated financialstatements.

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STRAYER EDUCATION, INC.CONSOLIDATEDSTATEMENTS OF STOCKHOLDERS’ EQUITY(in thousands, exceptsharedata)

|                                                                                  |        |  |             |          |            |                           |  |  |                                      |   |         |                                           |  |  |       |   |         |   |  |  |  |   |         |   |  |  |  |   |         |   |  |  |  |   |         |   |
|----------------------------------------------------------------------------------|--------|--|-------------|----------|------------|---------------------------|--|--|--------------------------------------|---|---------|-------------------------------------------|--|--|-------|---|---------|---|--|--|--|---|---------|---|--|--|--|---|---------|---|--|--|--|---|---------|---|
|                                                                             |        |  | CommonStock |          |            | Additional Paid-inCapital |  |  | RetainedEarnings(AccumulatedDeficit) |   |         | AccumulatedOtherComprehensiveIncome(Loss) |  |  | Total |
|                                                                                  | Shares |  |             | ParValue |
| Balance, December  31,2003                                                       |        |  |             |          | 10,703,395 |                           |  |  |                                      | $ | 107     |                                           |  |  |       | $ | 59,838  |   |  |  |  | $ | (26,918 | ) |  |  |  | $ | (49     | ) |  |  |  | $ | 32,978  |   |
| Exerciseof stockoptions                                                          |        |  |             |          | 335,416    |                           |  |  |                                      |   | 3       |                                           |  |  |       |   | 11,945  |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 11,948  |   |
| Taxbenefit from exercise of stockoptions                                    |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | 9,758   |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 9,758   |   |
| Issuanceof common stock for redemption ofpreferredstock                          |        |  |             |          | 3,977,120  |                           |  |  |                                      |   | 40      |                                           |  |  |       |   | 96,166  |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 96,206  |   |
| Repurchaseof common stock                                                        |        |  |             |          | (346,444   | )                         |  |  |                                      |   | (3      | )                                         |  |  |       |   | (36,764 | ) |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (36,767 | ) |
| Preferredstock dividends andaccretion                                            |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | (1,389  | ) |  |  |  |   | — |   |  |  |  |   | (1,389  | ) |
| Commonstock dividends                                                            |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | (4,950  | ) |  |  |  |   | — |   |  |  |  |   | (4,950  | ) |
| Changein net unrealized gains (losses) on marketable securities, net ofincometax |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | — |   |  |  |  |   | (102    | ) |  |  |  |   | (102    | ) |
| Netincome                                                                        |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | 41,240  |   |  |  |  |   | — |   |  |  |  |   | 41,240  |   |
| Balance,December  31,2004                                                        |        |  |             |          | 14,669,487 |                           |  |  |                                      | $ | 147     |                                           |  |  |       | $ | 140,943 |   |  |  |  | $ | 7,983   |   |  |  |  | $ | (151    | ) |  |  |  | $ | 148,922 |   |
| Exerciseof stockoptions                                                          |        |  |             |          | 28,333     |                           |  |  |                                      |   | — |                                           |  |  |       |   | 1,336   |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 1,336   |   |
| Taxbenefit from exercise of stockoptions                                    |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | 560     |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 560     |   |
| Repurchaseof commonstock                                                         |        |  |             |          | (410,071   | )                         |  |  |                                      |   | (4      | )                                         |  |  |       |   | (37,964 | ) |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (37,968 | ) |
| Restrictedstockgrant                                                             |        |  |             |          | 4,500      |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | — |   |
| Stock-basedcompensation                                                          |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | 48      |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 48      |   |
| Commonstock dividends                                                            |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | (9,028  | ) |  |  |  |   | — |   |  |  |  |   | (9,028  | ) |
| Changein net unrealized gains (losses) on marketable securities, net ofincometax |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | — |   |  |  |  |   | (95     | ) |  |  |  |   | (95     | ) |
| Netincome                                                                        |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | 48,065  |   |  |  |  |   | — |   |  |  |  |   | 48,065  |   |
| Balance,December  31,2005                                                        |        |  |             |          | 14,292,249 |                           |  |  |                                      | $ | 143     |                                           |  |  |       | $ | 104,923 |   |  |  |  | $ | 47,020  |   |  |  |  | $ | (246    | ) |  |  |  | $ | 151,840 |   |
| Exerciseof stockoptions                                                          |        |  |             |          | 149,334    |                           |  |  |                                      |   | 1       |                                           |  |  |       |   | 6,594   |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 6,595   |   |
| Taxbenefit from exercise of stockoptions                                    |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | 3,595   |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 3,595   |   |
| Repurchaseof common stock                                                        |        |  |             |          | (349,066   | )                         |  |  |                                      |   | (3      | )                                         |  |  |       |   | (35,038 | ) |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | (35,041 | ) |
| Restrictedstockgrant                                                             |        |  |             |          | 201,067    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | — |   |
| Stock-basedcompensation                                                          |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | 7,413   |   |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 7,413   |   |
| Commonstock dividends                                                            |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | (15,284 | ) |  |  |  |   | — |   |  |  |  |   | (15,284 | ) |
| Changein net unrealized gains (losses) on marketable securities, net ofincometax |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | — |   |  |  |  |   | 102     |   |  |  |  |   | 102     |   |
| Netincome                                                                        |        |  |             |          | —    |                           |  |  |                                      |   | — |                                           |  |  |       |   | — |   |  |  |  |   | 52,307  |   |  |  |  |   | — |   |  |  |  |   | 52,307  |   |
| Balance,December  31,2006                                                        |        |  |             |          | 14,293,584 |                           |  |  |                                      | $ | 141     |                                           |  |  |       | $ | 87,487  |   |  |  |  | $ | 84,043  |   |  |  |  | $ | (144    | ) |  |  |  | $ | 171,527 |   |
|                                                                                  |

Theaccompanying notes are an integral part of these consolidated financialstatements.

48

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Table of Contents

STRAYER EDUCATION, INC.CONSOLIDATEDSTATEMENTS OF CASH FLOWS(inthousands)

|                                                                                 |  |  |                               |   |         |      |  |  |      |   |         |   |  |  |  |   |         |   |
|---------------------------------------------------------------------------------|--|--|-------------------------------|---|---------|------|--|--|------|---|---------|---|--|--|--|---|---------|---|
|                                                                            |  |  | Forthe Year Ended December31, |
|                                                                            |  |  | 2004                          |   |         | 2005 |  |  | 2006 |
| Cashflows from operatingactivities:                                             |  |  |                               |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Netincome                                                                       |  |  |                               | $ | 41,240  |      |  |  |      | $ | 48,065  |   |  |  |  | $ | 52,307  |   |
| Adjustmentsto reconcile net income to net cash provided by operatingactivities: |  |  |                               |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Losson disposal ofassets                                                        |  |  |                               |   | 30      |      |  |  |      |   | 37      |   |  |  |  |   | — |   |
| Amortizationof deferred rent                                                    |  |  |                               |   | 614     |      |  |  |      |   | 230     |   |  |  |  |   | 190     |   |
| Depreciationand amortization                                                    |  |  |                               |   | 5,375   |      |  |  |      |   | 6,619   |   |  |  |  |   | 7,059   |   |
| Provisionfor student loan losses                                                |  |  |                               |   | (227    | )    |  |  |      |   | (162    | ) |  |  |  |   | (120    | ) |
| Deferredincome taxes                                                            |  |  |                               |   | (101    | )    |  |  |      |   | (63     | ) |  |  |  |   | (4,034  | ) |
| Stock-basedcompensation                                                         |  |  |                               |   | — |      |  |  |      |   | 48      |   |  |  |  |   | 7,413   |   |
| Changesin assets andliabilities:                                                |  |  |                               |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Tuitionreceivable, net                                                          |  |  |                               |   | (5,672  | )    |  |  |      |   | (14,266 | ) |  |  |  |   | (24,818 | ) |
| Othercurrent assets                                                             |  |  |                               |   | (899    | )    |  |  |      |   | 630     |   |  |  |  |   | (1,710  | ) |
| Otherassets                                                                     |  |  |                               |   | 25      |      |  |  |      |   | 4       |   |  |  |  |   | (25     | ) |
| Accountspayable                                                                 |  |  |                               |   | 287     |      |  |  |      |   | 1,503   |   |  |  |  |   | 4,581   |   |
| Accruedexpenses                                                                 |  |  |                               |   | (11     | )    |  |  |      |   | (835    | ) |  |  |  |   | 347     |   |
| Incometaxes payable                                                             |  |  |                               |   | 13,650  |      |  |  |      |   | (2,804  | ) |  |  |  |   | 4,801   |   |
| Excesstax benefits from stock-based payment arrangements                        |  |  |                               |   | — |      |  |  |      |   | — |   |  |  |  |   | (3,595  | ) |
| Unearnedtuition                                                                 |  |  |                               |   | 2,925   |      |  |  |      |   | 13,719  |   |  |  |  |   | 18,118  |   |
| Deferredlease incentives                                                        |  |  |                               |   | 745     |      |  |  |      |   | 2,342   |   |  |  |  |   | 1,235   |   |
| Studentloans originated or acquired                                             |  |  |                               |   | (1,361  | )    |  |  |      |   | (686    | ) |  |  |  |   | (3      | ) |
| Collectionson student loans receivable                                          |  |  |                               |   | 1,506   |      |  |  |      |   | 762     |   |  |  |  |   | 23      |   |
| Netcash provided by operating activities                                        |  |  |                               |   | 58,126  |      |  |  |      |   | 55,143  |   |  |  |  |   | 61,769  |   |
| Cashflows from investingactivities:                                             |  |  |                               |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Purchasesof property and equipment                                              |  |  |                               |   | (11,063 | )    |  |  |      |   | (12,275 | ) |  |  |  |   | (13,183 | ) |
| Purchasesof marketable securities                                               |  |  |                               |   | — |      |  |  |      |   | (20,000 | ) |  |  |  |   | (30,000 | ) |
| Netcash used in investing activities                                            |  |  |                               |   | (11,063 | )    |  |  |      |   | (32,275 | ) |  |  |  |   | (43,183 | ) |
| Cashflows from financingactivities:                                             |  |  |                               |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Commondividends paid                                                            |  |  |                               |   | (5,645  | )    |  |  |      |   | (9,028  | ) |  |  |  |   | (15,284 | ) |
| Preferreddividends paid                                                         |  |  |                               |   | (1,684  | )    |  |  |      |   | — |   |  |  |  |   | — |   |
| Proceedsfrom exercise of stock options                                          |  |  |                               |   | 11,948  |      |  |  |      |   | 1,336   |   |  |  |  |   | 6,595   |   |
| Excesstax benefits from stock-based payment arrangements                        |  |  |                               |   | — |      |  |  |      |   | — |   |  |  |  |   | 3,595   |   |
| Repurchaseof common stock                                                       |  |  |                               |   | (36,767 | )    |  |  |      |   | (37,968 | ) |  |  |  |   | (35,041 | ) |
| Netcash used in financing activities                                            |  |  |                               |   | (32,148 | )    |  |  |      |   | (45,660 | ) |  |  |  |   | (40,135 | ) |
| Netincrease (decrease) in cash and cash equivalents                             |  |  |                               |   | 14,915  |      |  |  |      |   | (22,792 | ) |  |  |  |   | (21,549 | ) |
| Cashand cash equivalents – beginning of year                              |  |  |                               |   | 82,089  |      |  |  |      |   | 97,004  |   |  |  |  |   | 74,212  |   |
| Cashand cash equivalents – end of year                                    |  |  |                               | $ | 97,004  |      |  |  |      | $ | 74,212  |   |  |  |  | $ | 52,663  |   |
| Non-cashtransactions:                                                           |  |  |                               |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Purchasesof property and equipment included in accountspayable                  |  |  |                               | $ | 633     |      |  |  |      | $ | 561     |   |  |  |  | $ | 501     |   |
|                                                                                 |

Theaccompanying notes are an integral part of these consolidated financialstatements.

49

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

1.    Nature ofOperations

Strayer Education, Inc. (the‘‘Company’’), a Maryland corporation,conducts its operations through its subsidiaries, Strayer University,Inc. (the ‘‘University’’) and EducationLoan Processing, Inc. (‘‘ELP’’). TheUniversity is an accredited institution of higher education thatprovides undergraduate and graduate degrees in various fields of studythrough 47 campuses (including two campuses opened for the 2007 winterterm and two opened for the 2007 spring term) in Pennsylvania,Delaware, Maryland, Washington, D.C., Virginia, North Carolina, SouthCarolina, Tennessee, Georgia, Florida, Alabama and Kentucky, andworldwide via the Internet through Strayer University Online. With theCompany’s focus on the customer, regardless of whether he or shechooses to take classes at a physical campus or online, we have onlyone reporting segment.

2.    Significant AccountingPolicies

Principles of Consolidation

The consolidatedfinancial statements include the accounts of the Company and itssubsidiaries, the University, ELP, and Professional Education, Inc.(which is currently inactive). All inter-company accounts andtransactions have been eliminated in the consolidated financialstatements.

Cash and Cash Equivalents

Cash and cashequivalents consist of cash invested in bank overnight deposits andmoney market mutual funds. The Company places its cash and temporarycash investments with high quality credit institutions. The Companyconsiders all highly liquid instruments purchased with a maturity ofthree months or less at the date of purchase to be cashequivalents.

Marketable Securities

Most of theCompany’s excess cash is invested in tax-exempt money marketfunds and a diversified, short-term, investment grade, tax-exempt bondfund to minimize the Company’s principal risk and to benefitfrom the tax efficiency of the funds’ underlying securities. Asof December  31,  2006, the Company had a total of$75.8  million invested in the short-term tax-exempt bond fund.The investments are considered‘‘available-for-sale’’ as they are not heldfor trading and will not be held to maturity, in accordance withStatement of Financial Accounting Standards No. 115, Accounting forCertain Investments in Debt and Equity Securities. The Companyrecords the net unrealized gains and losses for changes in fair valueas a component of accumulated other comprehensive income instockholders’ equity. Realized gains and losses from the sale ofmarketable securities are based on the specific identificationmethod.

Revenues

The Company’s educationalprograms are offered on a quarterly basis. Approximately 97% ofthe Company’s revenues during the year ended December31,  2006 consisted of tuition revenue. Tuition revenue isrecognized in the quarter of instruction. Tuition revenue is shown netof any refunds, withdrawals, corporate discounts, scholarships andemployee tuition discounts. At the time of registration, a liability(unearned tuition) is recorded for academic services to be provided anda tuition receivable is recorded for the portion of the tuition notpaid upfront in cash. Revenues also include textbook-related income,application fees, commencement fees, placement test fees, withdrawalfees, loan administration fees and other income, which are allrecognized when incurred.

50

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

Concentration of Credit Risk

TheCompany places its cash and temporary cash investments in money marketmutual funds and bank overnight deposits with high credit qualityinstitutions. Cash and cash equivalent balances are in excess of theFDIC insurance limit. The Company has not experienced any losses on itscash and cash equivalents. The Company has also invested its excesscash in a diversified, short-term, investment grade, tax-exempt bondfund that is classified under ‘‘MarketableSecurities.’’

Tuition receivables are notcollateralized; however, credit risk is minimized as a result of thediverse nature of the University’s student base. The Universityestablishes an allowance for doubtful tuition accounts based uponhistorical trends and other information.

Property andEquipment

Property and equipment are stated at cost lessaccumulated depreciation. In accordance with Statement of FinancialAccounting Standards No. 144, Accounting for the Impairment orDisposal of Long-Lived Assets, the carrying values of theCompany’s assets are re-evaluated when events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. If it is determined that an impairment loss has occurredbased on expected undiscounted future cash flows, then a loss isrecognized using a fair-value based model. Through 2006, no suchimpairment loss had occurred. Depreciation of property and equipment iscalculated using the straight-line method over the estimated usefullives ranging from 3 to 40 years. Depreciation and amortizationamounted to $5.4  million, $6.6  million and $7.1million for the years ended December  31,  2004, 2005 and2006, respectively.

Purchases of property and equipment andchanges in accounts payable for each of the three years in the periodended December  31,  2006 in the Consolidated Statements ofCash Flows have been adjusted to exclude non-cash purchases of propertyand equipment transactions during that period. In 2004, non-cashtransactions were included in these line items. This change inclassification had no impact on net increase (decrease) in cash andcash equivalents, and is immaterial to prior periods.

IncomeTaxes

The Company provides for deferred income taxes based ontemporary differences between financial statement and income tax basesof assets and liabilities using enacted tax rates in effect in the yearin which the differences are expected to reverse.

AdvertisingCosts

The Company expenses advertising costs in the quarter inwhich incurred, except for costs associated with the production oftelevision commercials which are expensed when the commercial is firstused.

Long-Term Liabilities

The Company has no debt;most of its long-term liabilities are for lease incentives related tothe opening of new campuses and for the straight-lining of rentexpense. In conjunction with the opening of some new campuses and otherfacilities, the Company was reimbursed by the lessors for improvementsmade to those leased properties. In accordance with FinancialAccounting Standards Board Technical Bulletin No. 88-1, thesereimbursements were capitalized as leasehold improvements and along-term liability established. The leasehold improvements and thelong-term liability are amortized on a straight-line basis over thecorresponding lease terms, which range from five to ten years. Inaccordance with the FASB Technical Bulletin No. 85-3,‘‘Accounting for Operating Leases with Schedule RentIncreases’’, the Company records rent expense on astraight-line basis over the initial term of a lease. The differencebetween the rent payment and the straight-line rent expense is recordedas a long-term liability. (See Note 8 below for moreinformation.)

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

Stock-Based Compensation

OnJanuary  1,  2006, the Company adopted Statement ofFinancial Accounting Standards No. 123(R), Share-basedPayment (‘‘FAS 123(R)’’), whichrequires the measurement and recognition of compensation expense forall share-based payment awards made to employees and directors,including employee stock options and employee stock purchases relatedto the Company’s Employee Stock Purchase Plan based on estimatedfair values. FAS 123(R) supersedes the Company’s previousaccounting under Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees (‘‘APB25’’) for periods beginning January  1,2006. In March 2005, the Securities and Exchange Commissionissued Staff Accounting Bulletin No. 107 (‘‘SAB107’’) relating to FAS 123(R). The Company has appliedthe provisions of SAB 107 in its adoption of FAS 123(R).

TheCompany adopted FAS 123(R) using the modified prospective transitionmethod provided under the rule, which requires the application of theaccounting standard as of January  1,  2006. In adoptingFAS 123(R), the Company used the long-form method for calculating theaccumulated windfall tax benefit. The Company’s consolidatedfinancial statements as of and for the twelve months endedDecember  31,  2006 reflect the impact of FAS 123(R). Inaccordance with the modified prospective transition method providedunder the rule, the Company’s consolidated financial statementsfor prior periods have not been restated to reflect, and do notinclude, the impact of FAS 123(R). Stock-based compensation expenserelated to restricted stock grants is expensed over the vesting periodusing the straight-line method for Company employees and thegraded-vesting method for members of the Board of Directors.Stock-based compensation expense recognized under FAS 123(R) for theyear ended December  31,  2006 was $8.1  million (or$5.1  million after tax) and reduced diluted EPS by$0.35.

FAS 123(R) requires companies to estimate the fair valueof share-based payment awards on the date of grant using anoption-pricing model. The Company has elected to estimate fair valueusing the Black-Scholes option pricing valuation model. The value ofthe portion of the award that is ultimately expected to vest isrecognized as expense over the requisite service periods in theCompany’s Consolidated Statements of Income. Prior to theadoption of FAS 123(R), the Company accounted for stock-based awards toemployees and directors using the intrinsic value method in accordancewith APB 25 pursuant to Statement of Financial Accounting StandardsNo. 123, Accounting for Stock-based Compensation(‘‘FAS 123’’). Under the intrinsic valuemethod, no stock-based compensation expense was recognized in theCompany’s Consolidated Statements of Income for stock optionsbecause the exercise price of the Company’s stock optionsgranted to employees and directors equaled the fair market value of theunderlying stock at the date of grant.

Stock-based compensationexpense recognized in the Company’s Consolidated Statements ofIncome for the twelve months ended December  31,  2006included compensation expense for share-based payment awards grantedprior to, but not yet vested as of December  31,  2005,based on the grant date fair value estimated in accordance with the proforma provisions of FAS 123 and compensation expense for theshare-based payment awards granted subsequent to December 31,2005, based on the grant date fair value estimated in accordance withthe provisions of FAS 123(R). As stock-based compensation expenserecognized in the Consolidated Statements of Income for the year endedDecember  31,  2006 is based on awards ultimately expectedto vest, the amounts have been reduced for estimated forfeitures. FAS123(R) requires forfeitures to be estimated at the time of grant andrevised, if necessary, in subsequent periods if actual forfeituresdiffer from those estimates. Forfeitures were estimated based onhistorical experience.

The Company’s determination of fairvalue of share-based payment awards on the date of grant using anoption-pricing model is affected by the Company’s stock price aswell as assumptions regarding a number of highly complex and subjectivevariables. These variables include, but are not limited to, theCompany’s expected stock price volatility over the term of theawards, and actual and projected employee stock option exercisebehaviors.

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

No stock options were granted in 2006. Forthe years ended December  31,  2004 and 2005, theBlack-Scholes option pricing model was used to estimate fair value asof the date of grant using the followingassumptions:

|                                              |  |  |                                |   |       |      |  |  |  |   |       |   |
|----------------------------------------------|--|--|--------------------------------|---|-------|------|--|--|--|---|-------|---|
|                                         |  |  | Forthe year ended December 31, |
|                                         |  |  | 2004                           |   |       | 2005 |
| Dividendyield(1)                             |  |  |                                |   | 0.24  | %    |  |  |  |   | 0.48  | % |
| Expectedvolatility(2)                        |  |  |                                |   | 34    | %    |  |  |  |   | 34    | % |
| Risk-freeinterestrate(3)                     |  |  |                                |   | 3.8   | %    |  |  |  |   | 3.9   | % |
| Expectedoption term (inyears)(4)             |  |  |                                |   | 6.1   |      |  |  |  |   | 6.1   |   |
| Weightedaverage fair value of optionsgranted |  |  |                                | $ | 45.27 |      |  |  |  | $ | 39.61 |   |
|                                              |

|  |
|--|
|  |  |
|  |

|     |                                                                                                          |
|-----|----------------------------------------------------------------------------------------------------------|
| (1) | Thedividend yield assumption is based on the Company’s history andexpectation of dividend payouts. |

|     |                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------|
| (2) | TheCompany analyzed historical volatility of the Company’s stock toestimate the expected volatility. |

|     |                                                                                                                                                 |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Therisk-free interest rate assumption is based on observed interest ratesappropriate for the term of the Company’s employee stockoptions. |

|     |                                                                                                        |
|-----|--------------------------------------------------------------------------------------------------------|
| (4) | The expected option termwas determined using the simplified method for estimating expectedoption life. |

Net Income Per Share

Basic earnings pershare is computed by dividing net income available to commonstockholders by the weighted average number of shares of common stockoutstanding during the periods. Diluted earnings per share reflects thepotential dilution that could occur assuming conversion or exercise ofall dilutive unexercised stock options and restricted stock. Thedilutive effect of stock options was determined using the treasurystock method. Under the treasury stock method, the proceeds receivedfrom the exercise of stock options, the amount of compensation cost forfuture service not yet recognized by the Company and the amount of taxbenefits that would be recorded in additional paid in capital when thestock options become deductible for income tax purposes are assumed tobe used to repurchase shares of the Company’s common stock. Stockoptions are not included in the computation of diluted earnings pershare when the stock option exercise price of an individual grantexceeds the average market price for the period. At December31,  2006, the Company had 10,000 issued and outstanding stockoptions that were excluded from the calculation. A reconciliation ofshares used to calculate basic and diluted earnings per share is asfollows (inthousands):

|                                                                                                          |  |  |      |  |         |      |  |  |      |  |         |  |  |  |  |  |         |  |
|----------------------------------------------------------------------------------------------------------|--|--|------|--|---------|------|--|--|------|--|---------|--|--|--|--|--|---------|--|
|                                                                                                     |  |  | 2004 |  |         | 2005 |  |  | 2006 |
| Weightedaverage shares outstanding used to compute basic earnings per share                              |  |  |      |  | 13,674  |      |  |  |      |  | 14,472  |  |  |  |  |  | 14,187  |  |
| Incrementalshares issuable upon the assumed conversion of Series AConvertible Redeemable Preferred Stock |  |  |      |  | 1,047   |      |  |  |      |  | — |  |  |  |  |  | — |  |
| Incrementalshares issuable upon the assumed exercise of stock options                                    |  |  |      |  | 336     |      |  |  |      |  | 269     |  |  |  |  |  | 282     |  |
| Unvestedrestrictedstock                                                                                  |  |  |      |  | — |      |  |  |      |  | — |  |  |  |  |  | 23      |  |
| Sharesused to compute diluted earnings per share                                                         |  |  |      |  | 15,057  |      |  |  |      |  | 14,741  |  |  |  |  |  | 14,492  |  |
|                                                                                                          |

Useof Estimates

The preparation of financial statements inconformity with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities at the dateof the financial statements and the reported amounts of expenses duringthe period reported. The most significant management estimates includedallowances for uncollectible accounts, accrued expenses, forfeiturerates for stock-based awards, and the provision for income taxes.Actual results could differ from those estimates.

53

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

Comprehensive Income

Comprehensiveincome consists of net income and unrealized gains (losses) oninvestments in marketable securities, net of incometaxes.

Recent Accounting Pronouncements

In May2005, the FASB issued Statement of Financial Accounting Standards No.154, Accounting Changes and Error Corrections – a replacementof APB Opinion No. 20 and FASB Statement No. 3(‘‘SFAS 154’’). SFAS 154 requiresretrospective application to prior periods’ financial statementsof changes in accounting principle, unless it is impracticable todetermine either the period-specific effects or the cumulative effectof the change. SFAS 154 also requires that retrospective application ofa change in accounting principle be limited to the direct effects ofthe change. Indirect effects of a change in accounting principle shouldbe recognized in the period of the accounting change. SFAS 154 alsorequires that a change in depreciation, amortization, or depletionmethod for long-lived, nonfinancial assets be accounted for as a changein accounting estimate effected by a change in accounting principle.SFAS 154 is effective for accounting changes and corrections of errorsmade in fiscal years beginning after December  15,  2005.The Company adopted SFAS 154 beginning in the first quarter of2006.

In July  2006, the Financial Accounting StandardsBoard issued FASB Interpretation No. 48, Accounting for Uncertaintyin Income Taxes (‘‘FIN 48’’). ThisInterpretation prescribes a recognition threshold and measurementattribute for the financial statement recognition and measurement of atax position taken or expected to be taken in a tax and penalties,accounting in interim periods, disclosure, and transition. TheInterpretation is effective for fiscal years beginning afterDecember  15,  2006. The Company adopted FIN 48 beginningin the first quarter of 2007. The adoption of FIN 48 is not expected tohave a material impact on its financial condition and results ofoperations.

In September  2006, the FASB issued Statementof Financial Accounting Standards No. 157 (‘‘SFAS157’’), Fair Value Measurements, which definesfair value, establishes guidelines for measuring fair value and expandsdisclosures regarding fair value measurements. SFAS 157 does notrequire any new fair value measurements but rather eliminatesinconsistencies in guidance found in various prior accountingpronouncements. SFAS 157 is effective for fiscal years beginning afterNovember  15,  2007. Earlier adoption is permitted,provided that the company has not yet issued financial statements,including for interim periods, for that fiscal year. We are currentlyevaluating the impact of SFAS 157, but do not expect the adoption ofSFAS 157 to have a material impact on our consolidated financialposition, results of operations or cashflows.

3.    Investments – MarketableSecurities

The cost and fair value for investments in marketablesecurities as of December  31,  2005 and 2006 are asfollows (inthousands):

|                     |  |  |      |   |        |      |  |  |  |   |        |   |
|---------------------|--|--|------|---|--------|------|--|--|--|---|--------|---|
|                |  |  | 2005 |   |        | 2006 |
| Cost                |  |  |      | $ | 46,000 |      |  |  |  | $ | 76,000 |   |
| Grossunrealizedloss |  |  |      |   | (406   | )    |  |  |  |   | (237   | ) |
| Fairvalue           |  |  |      | $ | 45,594 |      |  |  |  | $ | 75,763 |   |
|                     |

TheCompany has invested some of its excess cash in a diversified, no load,short-term, investment grade, tax-exempt bond fund. At December31,  2006, the 429 issues in this fund had an average creditrating of AA, an average maturity and an average duration of 1.2 years,and an average yield to maturity of 3.8%.

54

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

4.    Property and Equipment

Thecomposition of property and equipment as of December  31,2005 and 2006 is as follows (inthousands):

|                                          |  |  |      |   |         |      |  |  |                             |   |         |   |  |  |  |  |         |  |
|------------------------------------------|--|--|------|---|---------|------|--|--|-----------------------------|---|---------|---|--|--|--|--|---------|--|
|                                     |  |  | 2005 |   |         | 2006 |  |  | Estimateduseful life(years) |
| Land                                     |  |  |      | $ | 6,526   |      |  |  |                             | $ | 6,526   |   |  |  |  |  | — |  |
| Buildingsand improvements                |  |  |      |   | 19,399  |      |  |  |                             |   | 20,181  |   |  |  |  |  | 5-40    |  |
| Furnitureand equipment                   |  |  |      |   | 29,467  |      |  |  |                             |   | 37,377  |   |  |  |  |  | 5-7     |  |
| Leaseholdimprovements                    |  |  |      |   | 13,528  |      |  |  |                             |   | 16,785  |   |  |  |  |  | 3-10    |  |
| Vehicles                                 |  |  |      |   | 22      |      |  |  |                             |   | 22      |   |  |  |  |  | 5       |  |
| Construction inprogress                  |  |  |      |   | 98      |      |  |  |                             |   | 807     |   |  |  |  |  | — |  |
|                                     |  |  |      |   | 69,040  |      |  |  |                             |   | 81,698  |   |  |  |  |  |    |  |
| Accumulateddepreciation and amortization |  |  |      |   | (22,356 | )    |  |  |                             |   | (28,950 | ) |  |  |  |  |    |  |
|                                     |  |  |      | $ | 46,684  |      |  |  |                             | $ | 52,748  |   |  |  |  |  |    |  |
|                                          |

In2005 and 2006, the Company recorded leasehold improvements of$1,542,000 and $1,235,000, respectively, which were reimbursed bylessors as lease incentives. In 2006, the Company wrote-off $0.5million in fixed assets that were fully depreciated and no longer inservice.

5.    Restricted Cash

In 2003, as part ofcommencing operations in Pennsylvania, the Company was required tomaintain a ‘‘minimum protective endowment’’of at least $500,000. These funds are required as long as the Companyoperates its campuses in the state. The Company accounts for thesefunds as a long-term asset.

6.    Stock Options and RestrictedStock

In July  1996, the Company’s stockholdersapproved 1,500,000 shares of common stock for grants under theCompany’s 1996 Stock Option Plan (as amended, the‘‘Plan’’). This Plan was amended by thestockholders at the May  2001 Annual Stockholders’ Meetingand at the May  2005 Annual Stockholders’ Meeting toincrease the number of shares authorized for issuance thereunder by1,000,000 and 500,000, respectively. A total of 3,000,000 shares havetherefore been approved for grant under the Plan. The Plan was againamended at the May  2006 Annual Stockholders’ Meeting toauthorize a one-time exchange of stock options for restricted stock byemployees (excluding the five highest compensated executive officers)and to permit restricted stock and cash awards to qualify for favorabletax treatment under Section 162(m) of the Internal Revenue Code. ThePlan provides for the grant of options intended to qualify as incentivestock options, and also provides for the grant of non-qualifyingoptions and restricted stock to employees, officers and directors ofthe Company. Options and restricted stock may be granted to eligibleemployees, officers or directors of the Company at the discretion ofthe Board of Directors. Vesting provisions are also at the discretionof the Board of Directors. Options may be granted at option pricesbased at or above the fair market value of the shares at the date ofgrant. The maximum term of the options granted under the Plan is tenyears.

In February  2006, the Company granted 19,500 sharesof restricted stock to several employees. These shares vest 100%on February  14,  2010. The Company’s stock priceclosed at $91.27 on the date of the restricted stock grant.

InFebruary  2006, the Company’s Board of Directors approvedcash payments to the holders of vested stock options in an amountequivalent to the Company’s common stock dividend. These cashpayments are to be remitted on the same dates as the Company’sdividends and amounted to $0.6  million in 2006.

55

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

In February  2006, theCompany’s Board of Directors approved a grant of 131,478 sharesof restricted stock to the Chairman and Chief Executive Officer. Theseshares vest 100% on December  1,  2008 based on theachievement of certain performance criteria. The performance criteriacategories contained in the grant are covered by the May  2006amendment to the Plan, so that this restricted stock grant is eligiblefor favorable tax treatment by the Company under Section 162(m) of theInternal Revenue Code. Expensing of these shares commenced followingstockholder approval of this Plan amendment on May  3,2006. The Company’s stock price closed at $103.60 on thatdate.

In the second quarter of 2006, the Company granted 32,765shares of restricted stock to employees in exchange for 105,000 stockoptions pursuant to the one-time exchange offer approved by theshareholders. Of the 11 eligible employees, 10 chose to participate inthe offer. The incremental stock-based compensation expense incurred bythe Company as a result of this offer was immaterial. TheCompany’s stock price closed at $103.60 on the date that theexchange offer was approved by the shareholders and priced.

InMay  2006, the Company’s Board of Directors granted 4,632shares of restricted stock to various members of the Board ofDirectors. These shares vest equally over a three year period. TheCompany’s stock price closed at $103.60 on the date of therestricted stock grant.

In July  2006, the Company’sBoard of Directors approved a grant of 20,192 shares of restrictedstock to the Company’s newly appointed President and ChiefOperating Officer. These shares vest 100% on July25,  2010 based on the achievement of certain performancecriteria. The performance criteria categories contained in the grantare covered by the May  2006 amendment to the Plan, so that thisrestricted stock grant is eligible for favorable tax treatment by theCompany under Section 162(m) of the Internal Revenue Code. TheCompany’s stock price closed at $99.05 on the date of therestricted stock grant.

Stock Options

All stock optionsgranted after 2000 vest over three to four years with exercise pricesranging from $33.69 to $119.72. These options expire within six toeight years from date of grant and had a weighted-average contractuallife of 2.6 years as of December  31,2006.

56

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

The table below sets forth the stockoption activity for the years ended December  31,  2004,2005 and 2006 and other stock option information at December31,2006:

|                               |  |  |                |  |           |                               |  |  |                                                |   |         |                                           |  |  |  |  |        |  |  |  |  |   |        |  |
|-------------------------------|--|--|----------------|--|-----------|-------------------------------|--|--|------------------------------------------------|---|---------|-------------------------------------------|--|--|--|--|--------|--|--|--|--|---|--------|--|
|                          |  |  | Numberofshares |  |           | Weighted-averageexerciseprice |  |  | Weighted-averageremainingcontractuallife(yrs.) |   |         | Aggregate intrinsic value(1)(inthousands) |
| Balance, December  31,2003    |  |  |                |  | 1,131,667 |                               |  |  |                                                | $ | 41.05   |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Grants                        |  |  |                |  | 85,000    |                               |  |  |                                                |   | 113.54  |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Exercises                     |  |  |                |  | (335,416  | )                             |  |  |                                                |   | 35.62   |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Forfeitures                   |  |  |                |  | (26,667   | )                             |  |  |                                                |   | 78.40   |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Balance,December  31,2004     |  |  |                |  | 854,584   |                               |  |  |                                                | $ | 49.22   |                                           |  |  |  |  | 3.7    |  |  |  |  |   | 52,277 |  |
| Grants                        |  |  |                |  | 277,083   |                               |  |  |                                                |   | 103.04  |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Exercises                     |  |  |                |  | (28,333   | )                             |  |  |                                                |   | 47.18   |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Forfeitures                   |  |  |                |  | —   |                               |  |  |                                                |   | — |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Balance,December  31,2005     |  |  |                |  | 1,103,334 |                               |  |  |                                                | $ | 62.79   |                                           |  |  |  |  | 3.6    |  |  |  |  |   | 38,620 |  |
| Grants                        |  |  |                |  | —   |                               |  |  |                                                |   | — |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Exercises                     |  |  |                |  | (149,334  | )                             |  |  |                                                |   | 44.17   |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Forfeitures/Exchanges         |  |  |                |  | (191,666  | )                             |  |  |                                                |   | 102.64  |                                           |  |  |  |  |   |  |  |  |  |   |   |  |
| Balance,December  31,2006     |  |  |                |  | 762,334   |                               |  |  |                                                | $ | 56.42   |                                           |  |  |  |  | 2.6    |  |  |  |  | $ | 37,338 |  |
| Vested,December  31,2006      |  |  |                |  | 561,917   |                               |  |  |                                                | $ | 41.88   |                                           |  |  |  |  | 1.5    |  |  |  |  | $ | 36,058 |  |
| Exercisable,December  31,2006 |  |  |                |  | 561,917   |                               |  |  |                                                | $ | 41.88   |                                           |  |  |  |  | 1.5    |  |  |  |  | $ | 36,058 |  |
|                               |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Theaggregate intrinsic value in the table above represents the totalpre-tax intrinsic value (the difference between the Company’sclosing stock price on December 31 of each year and the exercise price,multiplied by the number of in-the-money options) that would have beenreceived by the option holders had all option holders exercised theiroptions on December  31 of that year. The amount of aggregateintrinsic value will change based on the fair market value of ourstock. |

The number of shares exercisable as ofDecember  31,  2004, 2005 and 2006 are asfollows:

|                                  |  |  |                 |  |         |                               |  |  |  |   |       |  |
|----------------------------------|--|--|-----------------|--|---------|-------------------------------|--|--|--|---|-------|--|
|                             |  |  | Numberof shares |  |         | Weighted-averageexerciseprice |
| Exercisable, December  31,  2004 |  |  |                 |  | 536,248 |                               |  |  |  | $ | 39.04 |  |
| Exercisable,December  31,  2005  |  |  |                 |  | 621,247 |                               |  |  |  | $ | 40.86 |  |
| Exercisable,December  31,  2006  |  |  |                 |  | 561,917 |                               |  |  |  | $ | 41.88 |  |
|                                  |

Thefollowing table summarizes information regarding stock option exercisesfor the years ended December  31,  2004, 2005 and 2006 (inthousands):

|                                               |  |  |                              |   |        |      |  |  |      |   |       |  |  |  |  |   |       |  |
|-----------------------------------------------|--|--|------------------------------|---|--------|------|--|--|------|---|-------|--|--|--|--|---|-------|--|
|                                          |  |  | Forthe year endedDecember31, |
|                                          |  |  | 2004                         |   |        | 2005 |  |  | 2006 |
| Proceedsfrom stock optionsexercised           |  |  |                              | $ | 11,948 |      |  |  |      | $ | 1,336 |  |  |  |  | $ | 6,595 |  |
| Taxbenefits related to stock optionsexercised |  |  |                              | $ | 9,758  |      |  |  |      | $ | 560   |  |  |  |  | $ | 3,595 |  |
| Intrinsicvalue of stock options exercised(1)  |  |  |                              | $ | 26,135 |      |  |  |      | $ | 1,434 |  |  |  |  | $ | 9,225 |  |
|                                               |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                        |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Intrinsicvalue of stock options exercised is estimated by taking the differencebetween the Company’s closing stock price on the date ofexercise and the exercise price, multiplied by the number of optionsexercised for each option holder and then aggregated. |

57

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

The following table summarizes informationabout the stock options to purchase the Company’s common stockat December  31,2006:

|                         |  |  |                             |  |         |                                                |  |  |                               |  |     |                              |  |  |                               |   |        |  |  |  |  |  |         |  |  |  |  |   |         |  |
|-------------------------|--|--|-----------------------------|--|---------|------------------------------------------------|--|--|-------------------------------|--|-----|------------------------------|--|--|-------------------------------|---|--------|--|--|--|--|--|---------|--|--|--|--|---|---------|--|
|                    |  |  | OptionsOutstanding          |  |         | OptionsExercisable                             |
| Rangeof exercise prices |  |  | Numberoutstandingat12/31/06 |  |         | Weighted-averageremainingcontractuallife(yrs.) |  |  | Weighted-averageexerciseprice |  |     | Number exercisableat12/31/06 |  |  | Weighted-averageexerciseprice |
| $33.69 –67.84     |  |  |                             |  | 601,917 |                                                |  |  |                               |  | 1.7 |                              |  |  |                               | $ | 42.66  |  |  |  |  |  | 561,917 |  |  |  |  | $ | 41.88   |  |
| $107.28–107.28    |  |  |                             |  | 150,417 |                                                |  |  |                               |  | 6.1 |                              |  |  |                               | $ | 107.28 |  |  |  |  |  | — |  |  |  |  |   | — |  |
| $119.72–119.72    |  |  |                             |  | 10,000  |                                                |  |  |                               |  | 5.4 |                              |  |  |                               | $ | 119.72 |  |  |  |  |  | — |  |  |  |  |   | — |  |
| $33.69–119.72     |  |  |                             |  | 762,334 |                                                |  |  |                               |  | 2.6 |                              |  |  |                               | $ | 56.42  |  |  |  |  |  | 561,917 |  |  |  |  | $ | 41.88   |  |
|                         |

RestrictedStock

The table below sets forth the restricted stock activityfor the years ended December  31, 2005 and2006:

|                            |  |  |                |  |         |                            |  |  |  |   |         |  |
|----------------------------|--|--|----------------|--|---------|----------------------------|--|--|--|---|---------|--|
|                       |  |  | Numberofshares |  |         | Weighted-averagegrantprice |
| Balance, December  31,2004 |  |  |                |  | — |                            |  |  |  |   | — |  |
| Grants                     |  |  |                |  | 4,500   |                            |  |  |  | $ | 100.58  |  |
| Vestedshares               |  |  |                |  | — |                            |  |  |  |   | — |  |
| Forfeitures                |  |  |                |  | — |                            |  |  |  |   | — |  |
| Balance,December  31,2005  |  |  |                |  | 4,500   |                            |  |  |  | $ | 100.58  |  |
| Grants                     |  |  |                |  | 208,567 |                            |  |  |  |   | 102.01  |  |
| Vestedshares               |  |  |                |  | — |                            |  |  |  |   | — |  |
| Forfeitures                |  |  |                |  | (7,500  | )                          |  |  |  |   | 91.27   |  |
| Balance,December  30,2006  |  |  |                |  | 205,567 |                            |  |  |  | $ | 102.37  |  |
|                            |

Valuationand Expense Information Under FAS 123(R) and Pro forma InformationUnder FAS 123 for Periods Prior to January  1,  2006.

At December  31,  2006, total stock-based compensationcost which has not yet been recognized was $18.5 million,representing $15.1  million for unvested restricted stock and$3.4  million for unvested stock options. This cost is expectedto be recognized over the next 43 months on a weighted-averagebasis.

For the years ended December  31,  2004 and2005, had compensation expense been determined based on the fair valueof the options at grant dates computed in accordance with FAS 123, thepro  forma amounts would be as follows (in thousands except pershare data):

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

|                                            |            |  |                               |             |        |      |  |  |  |   |        |  |
|--------------------------------------------|------------|--|-------------------------------|-------------|--------|------|--|--|--|---|--------|--|
|                                       |            |  | Forthe year endedDecember 31, |
|                                       |            |  | 2004                          |             |        | 2005 |
|                                            | (Proforma) |  |                               | (Pro forma) |
| Netincome                                  |            |  |                               | $           | 41,240 |      |  |  |  | $ | 48,065 |  |
| Stock-basedcompensation expense, net oftax |            |  |                               |             | 2,821  |      |  |  |  |   | 3,383  |  |
| Proforma netincome                         |            |  |                               | $           | 38,419 |      |  |  |  | $ | 44,682 |  |
| Netincome pershare:                        |            |  |                               |             |   |      |  |  |  |   |   |  |
| Asreported:                                |            |  |                               |             |   |      |  |  |  |   |   |  |
| Basic                                      |            |  |                               | $           | 2.91   |      |  |  |  | $ | 3.32   |  |
| Diluted                                    |            |  |                               |             | 2.74   |      |  |  |  |   | 3.26   |  |
| Proforma                                   |            |  |                               |             |   |      |  |  |  |   |   |  |
| Basic                                      |            |  |                               | $           | 2.71   |      |  |  |  | $ | 3.09   |  |
| Diluted                                    |            |  |                               |             | 2.55   |      |  |  |  |   | 3.02   |  |
|                                            |

Thefollowing table summarizes the pro forma stock-based compensationexpense related to employee stock options under FAS 123 for the yearsended December  31,  2004 and 2005. The table also includesthe actual stock-based compensation expense recorded for the year endedDecember  31,  2006 by expense line item (inthousands):

|                                                              |  |  |                                 |   |       |                 |  |  |            |   |       |  |  |  |  |   |       |  |
|--------------------------------------------------------------|--|--|---------------------------------|---|-------|-----------------|--|--|------------|---|-------|--|--|--|--|---|-------|--|
|                                                         |  |  | Forthe year ended December  31, |
|                                                         |  |  | 2004(Proforma)                  |   |       | 2005(Pro forma) |  |  | Actual2006 |
| Instruction and educationalsupport                           |  |  |                                 | $ | 726   |                 |  |  |            | $ | 821   |  |  |  |  | $ | 638   |  |
| Sellingandpromotion                                          |  |  |                                 |   | 188   |                 |  |  |            |   | 547   |  |  |  |  |   | 545   |  |
| Generalandadministration                                     |  |  |                                 |   | 3,675 |                 |  |  |            |   | 4,106 |  |  |  |  |   | 6,866 |  |
| Stock-basedcompensation expense included in operatingexpense |  |  |                                 |   | 4,589 |                 |  |  |            |   | 5,474 |  |  |  |  |   | 8,049 |  |
| Taxbenefit                                                   |  |  |                                 |   | 1,768 |                 |  |  |            |   | 2,091 |  |  |  |  |   | 2,992 |  |
| Stock-basedcompensation expense, net oftax                   |  |  |                                 | $ | 2,821 |                 |  |  |            | $ | 3,383 |  |  |  |  | $ | 5,057 |  |
|                                                              |

7.    SeriesA Convertible Mandatorily Redeemable Preferred Stock

A total of6,000,000 shares of Series A Convertible Redeemable Preferred Stock,par value $.01, have been authorized. In May  2001, the Companyunderwent a $150  million recapitalization and change of controltransaction in which it issued 5,769,231 shares of its Series AConvertible Mandatorily Redeemable Preferred Stock (the‘‘Series A Convertible Redeemable PreferredStock’’) of the Company to an investor group consistingof New Mountain Partners, L.P. and MidOcean Capital Investors, L.P.(formerly DB Capital Partners, Inc.) (collectively, the‘‘Original Investors’’). The Series AConvertible Redeemable Preferred Stock had an effective dividend yieldof 5.43% and each share of Series A Convertible RedeemablePreferred Stock was convertible into one share common stock, subject toadjustment under certain circumstances. The Company used the$150  million, together with approximately $36.4  millionof its cash and marketable securities, to repurchase 7,175,000 sharesof outstanding common stock of the Company in a tender offer at $25.00per share open to all shareholders; as the Company’s shares hadtraded above $25.00 per share, only the Company’s then CEO andmajority stockholder tendered shares. In March  2004,3.1  million outstanding and accrued shares of the Series AConvertible Redeemable Preferred Stock were converted into shares ofcommon stock on a one for one basis and sold in a secondary publicoffering. The Company received no proceeds from such offering otherthan $4.2  million associated with certain management optionexercises in connection with the secondary offering. In June2004, the remaining 875,120 outstanding and accrued shares of Series AConvertible Redeemable Preferred Stock were 

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

called for redemption by the Company and inlieu of being redeemed for cash, were converted by the holders into875,120 common shares in accordance with the terms of the Series Ashares. As a result, the Company does not have any preferred sharesoutstanding.

8.    Long-Term Liabilities

LeaseIncentives

In conjunction with the opening of new campusesduring 2005 and 2006, the Company recorded reimbursements by thelessors for improvements made to the leased properties in the amount of$1.5  million and $1.2  million, respectively. Inaccordance with Financial Accounting Standards Board Technical BulletinNo. 88-1, these reimbursements were capitalized as leaseholdimprovements and a long-term liability established. The leaseholdimprovements and the long-term liability will be amortized on astraight-line basis over the corresponding lease terms, which rangefrom five to 10  years. As of December  31,  2005 and2006, the Company had deferred lease incentives of $3.5  millionand $3.9  million, respectively.

LeaseObligations

In accordance with the FASB Technical Bulletin No.85-3, ‘‘Accounting for Operating Leases with ScheduleRent Increases,’’ the Company records rent expense on astraight-line basis over the initial term of a lease. The differencebetween the rent payment and the straight-line rent expense is recordedas a long-term liability. As of December  31,  2005 and2006, the Company had lease obligations of $2.8  million and$3.8  million, respectively.

9.    Other EmployeeBenefit Plans

The Company has a 401(k) plan covering alleligible employees of the Company. Participants may contribute up to$15,500 (effective January  1,  2007) of their basecompensation. Employee contributions are voluntary. Discretionarycontributions were made by the Company, matching up to 3% ofannual wages contributed to the plan in 2006 and 2005 and up to2% in 2004. The Company’s contributions totaled $400,000,$660,000 and $744,000 for the years ended December  31,2004, 2005 and 2006, respectively.

In May  1998, theCompany adopted the Strayer Education, Inc. Employee Stock PurchasePlan (‘‘ESPP’’). Under the ESPP, eligibleemployees may purchase shares of the Company’s common stock,subject to certain limitations, at 90 percent of its market value atthe date of purchase. Purchases are limited to 10 percent of anemployee’s eligible compensation. The aggregate number of sharesof common stock that may be made available for purchase byparticipating employees under the ESPP is 2,500,000 shares. Sharespurchased in the open market for employees for the years endedDecember  31,  2004, 2005 and 2006 were asfollows:

|        |  |  |                 |  |       |                       |  |  |  |   |       |  |
|--------|--|--|-----------------|--|-------|-----------------------|--|--|--|---|-------|--|
|   |  |  | Sharespurchased |  |       | Average pricepershare |
| 2004   |  |  |                 |  | 4,186 |                       |  |  |  | $ | 98.78 |  |
| 2005   |  |  |                 |  | 4,758 |                       |  |  |  | $ | 89.17 |  |
| 2006   |  |  |                 |  | 4,767 |                       |  |  |  | $ | 91.33 |  |
|        |

10.    StockRepurchase Plan

As announced on November  3,  2003,the Company’s Board of Directors initially authorized theCompany to repurchase up to an aggregate of $15  million in valueof common stock through December  31,  2004 in open marketpurchases from time to time at the discretion of the Company’smanagement depending on market conditions and other corporateconsiderations. The authorization 

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

was increased by an additional $25million in May  2004, an additional $25  million inOctober  2004, an additional $25  million in July2005, an additional $20  million in October  2005, and anadditional $35  million in October  2006. Accordingly, atotal of $145  million has been authorized by theCompany’s Board of Directors for share repurchase. All of theCompany’s share repurchases were effected in compliance withRule 10b-18 under the Securities Exchange Act of 1934, as amended. Thisstock repurchase plan may be modified, suspended or terminated at anytime by the Company without notice.

A summary of theCompany’s stock repurchase activity for the years endedDecember  31,  2004, 2005 and 2006, all of which was partof a publicly announced plan, is set forth in the tablebelow:

|        |  |  |                            |  |           |                            |  |  |                                              |   |        |  |  |  |  |   |        |  |
|--------|--|--|----------------------------|--|-----------|----------------------------|--|--|----------------------------------------------|---|--------|--|--|--|--|---|--------|--|
|   |  |  | Numberof sharesrepurchased |  |           | Average price paidpershare |  |  | Amount available forfuturerepurchases($mil.) |
| 2004   |  |  |                            |  | 346,444   |                            |  |  |                                              | $ | 106.13 |  |  |  |  |   |   |  |
| 2005   |  |  |                            |  | 410,071   |                            |  |  |                                              | $ | 92.59  |  |  |  |  |   |   |  |
| 2006   |  |  |                            |  | 349,066   |                            |  |  |                                              | $ | 100.39 |  |  |  |  |   |   |  |
|   |  |  |                            |  | 1,105,581 |                            |  |  |                                              | $ | 99.29  |  |  |  |  | $ | 32.0   |  |
|        |

11.    Commitmentsand Contingencies

The University participates in various federalstudent financial assistance programs which are subject to audit.Management believes that the potential effects of audit adjustments, ifany, for the periods currently under audit will not have a materialadverse effect on the Company’s financial position, results ofoperations or cash flows.

As of December  31,  2006,the Company had 46 long-term operating leases for campuses and otheradministrative locations. Rent expense was $8,645,000, $10,509,000 and$12,828,000 for the years ended December  31,  2004, 2005and 2006, respectively. The Company had one lease with affiliates ofthe Company’s former CEO and majority stockholder. This leaseexpired in 2006; however, the Company’s former CEO and majoritystockholder sold his interest in this building in February  2005.Rent paid to entities affiliated with the Company’s former CEOand majority stockholder were $356,000 and $45,000 and for the yearsended December  31,  2004 and 2005, respectively.

Therents on the Company’s leases are subject to annual increases.The minimum rental commitments for the Company as of December31,  2006, are as follows (inthousands):

|            |  |  |                          |   |         |  |
|------------|--|--|--------------------------|---|---------|--|
|       |  |  | Minimumrentalcommitments |
| 2007       |  |  |                          |   | 13,941  |  |
| 2008       |  |  |                          |   | 14,557  |  |
| 2009       |  |  |                          |   | 14,827  |  |
| 2010       |  |  |                          |   | 14,236  |  |
| 2011       |  |  |                          |   | 12,368  |  |
| Thereafter |  |  |                          |   | 39,298  |  |
| Total      |  |  |                          | $ | 109,227 |  |
|            |

Inaddition, the Company has available two $10  million creditfacilities from two banks. Interest on any borrowings under eitherfacility will accrue at an annual rate not to exceed 0.75% abovethe London Interbank Offered Rate. The Company does not pay a fee forthese facilities. There have been no borrowings by the Company underthese credit facilities. An unsecured letter of credit in the amount of$938,000, which expires in July  2007, was issued by StrayerUniversity in favor of regulators in connection with their periodicapproval activities.

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

12.    Income Taxes

The incometax provision for the years ended December  31,  2004, 2005and 2006 is summarized below (inthousands):

|                                |  |  |      |   |        |      |  |  |      |   |        |   |  |  |  |   |        |   |
|--------------------------------|--|--|------|---|--------|------|--|--|------|---|--------|---|--|--|--|---|--------|---|
|                           |  |  | 2004 |   |        | 2005 |  |  | 2006 |
| Current:                       |  |  |      |   |   |      |  |  |      |   |   |   |  |  |  |   |   |   |
| Federal                        |  |  |      | $ | 21,184 |      |  |  |      | $ | 25,502 |   |  |  |  | $ | 29,486 |   |
| State                          |  |  |      |   | 4,024  |      |  |  |      |   | 5,421  |   |  |  |  |   | 6,319  |   |
| Totalcurrent                   |  |  |      |   | 25,208 |      |  |  |      |   | 30,923 |   |  |  |  |   | 35,805 |   |
| Deferred:                      |  |  |      |   |   |      |  |  |      |   |   |   |  |  |  |   |   |   |
| Federal                        |  |  |      |   | 561    |      |  |  |      |   | (798   | ) |  |  |  |   | (3,680 | ) |
| State                          |  |  |      |   | 69     |      |  |  |      |   | (344   | ) |  |  |  |   | (354   | ) |
| Totaldeferred                  |  |  |      |   | 630    |      |  |  |      |   | (1,142 | ) |  |  |  |   | (4,034 | ) |
| Totalprovision for incometaxes |  |  |      | $ | 25,838 |      |  |  |      | $ | 29,781 |   |  |  |  | $ | 31,771 |   |
|                                |

Thetax effects of the principal temporary differences that give rise tothe Company’s deferred tax assets (liabilities) are as follows asof December  31,  2005 and 2006 (inthousands):

|                                            |  |  |      |   |        |      |  |  |  |   |        |   |
|--------------------------------------------|--|--|------|---|--------|------|--|--|--|---|--------|---|
|                                       |  |  | 2005 |   |        | 2006 |
| Tuitionreceivable and student loans        |  |  |      | $ | 798    |      |  |  |  | $ | 1,192  |   |
| Accrued vacationpayable                    |  |  |      |   | 118    |      |  |  |  |   | 151    |   |
| Unrealized losseson marketable securities  |  |  |      |   | 159    |      |  |  |  |   | 93     |   |
| Currentnet deferred tax asset              |  |  |      |   | 1,075  |      |  |  |  |   | 1,436  |   |
| Studentloans                               |  |  |      |   | 2      |      |  |  |  |   | 1      |   |
| Property and equipment                     |  |  |      |   | (1,322 | )    |  |  |  |   | (1,012 | ) |
| Deferred leasingcosts                      |  |  |      |   | 1,096  |      |  |  |  |   | 1,503  |   |
| Stock-basedcompensation                    |  |  |      |   | 19     |      |  |  |  |   | 2,908  |   |
| Long-termnet deferred tax asset(liability) |  |  |      |   | (205   | )    |  |  |  |   | 3,400  |   |
| Netdeferred taxasset                       |  |  |      | $ | 870    |      |  |  |  | $ | 4,836  |   |
|                                            |

Areconciliation between the Company’s statutory tax rate and theeffective tax rate for the years ended December  31,  2004,2005 and 2006 is asfollows:

|                                            |  |  |      |  |         |      |  |  |      |  |      |    |  |  |  |  |      |    |
|--------------------------------------------|--|--|------|--|---------|------|--|--|------|--|------|----|--|--|--|--|------|----|
|                                       |  |  | 2004 |  |         | 2005 |  |  | 2006 |
| Statutoryfederal rate                      |  |  |      |  | 35.0    | %    |  |  |      |  | 35.0 | %  |  |  |  |  | 35.0 | %  |
| Stateincome taxes, net of federal benefits |  |  |      |  | 4.3     | %    |  |  |      |  | 4.4  | %  |  |  |  |  | 4.9  | %  |
| Non-taxableinterestincome                  |  |  |      |  | (0.8    | )%   |  |  |      |  | (1.3 | )% |  |  |  |  | (1.8 | )% |
| Other                                      |  |  |      |  | — |      |  |  |      |  | 0.2  | %  |  |  |  |  | (0.3 | )% |
| Effectivetax rate                          |  |  |      |  | 38.5    | %    |  |  |      |  | 38.3 | %  |  |  |  |  | 37.8 | %  |
|                                            |

Cashpayments for income taxes were $12.3  million in 2004,$32.6  million in 2005, and $31.0  million in2006.

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STRAYEREDUCATION, INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

13.    Summarized Quarterly FinancialData (Unaudited)

Quarterly financial information for 2005 and2006 is as follows (in thousands except per sharedata):

|                       |  |  |         |   |        |        |  |  |        |   |        |        |  |  |  |   |        |  |  |  |  |   |        |  |
|-----------------------|--|--|---------|---|--------|--------|--|--|--------|---|--------|--------|--|--|--|---|--------|--|--|--|--|---|--------|--|
|                  |  |  | Quarter |
|                  |  |  | First   |   |        | Second |  |  | Third  |   |        | Fourth |
| 2005                  |  |  |    |   |        |   |  |  |   |   |        |   |
| Revenues              |  |  |         | $ | 56,153 |        |  |  |        | $ | 55,249 |        |  |  |  | $ | 47,087 |  |  |  |  | $ | 62,018 |  |
| Incomefrom operations |  |  |         |   | 22,488 |        |  |  |        |   | 19,492 |        |  |  |  |   | 9,572  |  |  |  |  |   | 23,312 |  |
| Netincome             |  |  |         |   | 14,091 |        |  |  |        |   | 12,525 |        |  |  |  |   | 6,438  |  |  |  |  |   | 15,011 |  |
| Netincome pershare:   |  |  |         |   |   |        |  |  |        |   |   |        |  |  |  |   |   |  |  |  |  |   |   |  |
| Basic                 |  |  |         | $ | 0.96   |        |  |  |        | $ | 0.86   |        |  |  |  | $ | 0.45   |  |  |  |  | $ | 1.05   |  |
| Diluted               |  |  |         | $ | 0.94   |        |  |  |        | $ | 0.85   |        |  |  |  | $ | 0.44   |  |  |  |  | $ | 1.03   |  |
|                       |

|                       |  |  |         |   |        |        |  |  |        |   |        |        |  |  |  |   |        |  |  |  |  |   |        |  |
|-----------------------|--|--|---------|---|--------|--------|--|--|--------|---|--------|--------|--|--|--|---|--------|--|--|--|--|---|--------|--|
|                  |  |  | Quarter |
|                  |  |  | First   |   |        | Second |  |  | Third  |   |        | Fourth |
| 2006                  |  |  |    |   |        |   |  |  |   |   |        |   |
| Revenues              |  |  |         | $ | 67,090 |        |  |  |        | $ | 65,558 |        |  |  |  | $ | 56,693 |  |  |  |  | $ | 74,307 |  |
| Incomefrom operations |  |  |         |   | 24,986 |        |  |  |        |   | 21,473 |        |  |  |  |   | 8,998  |  |  |  |  |   | 24,079 |  |
| Netincome             |  |  |         |   | 15,956 |        |  |  |        |   | 14,018 |        |  |  |  |   | 6,336  |  |  |  |  |   | 15,997 |  |
| Netincome pershare:   |  |  |         |   |   |        |  |  |        |   |   |        |  |  |  |   |   |  |  |  |  |   |   |  |
| Basic                 |  |  |         | $ | 1.12   |        |  |  |        | $ | 0.99   |        |  |  |  | $ | 0.45   |  |  |  |  | $ | 1.13   |  |
| Diluted               |  |  |         | $ | 1.10   |        |  |  |        | $ | 0.97   |        |  |  |  | $ | 0.44   |  |  |  |  | $ | 1.11   |  |
|                       |

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STRAYEREDUCATION, INC.Schedule II – Valuation and QualifyingAccounts(inthousands)

|                                |  |  |                          |   |        |                           |  |  |            |   |        |                      |  |  |                                  |   |        |   |  |  |  |   |        |  |  |  |        |
|--------------------------------|--|--|--------------------------|---|--------|---------------------------|--|--|------------|---|--------|----------------------|--|--|----------------------------------|---|--------|---|--|--|--|---|--------|--|--|--|--------|
| Description                    |  |  | Balancebeginningofperiod |   |        | Additionschargedtoexpense |  |  | Deductions |   |        | Balance end ofperiod |  |  | Bad debtexpense as a % ofrevenue |
| Deduction from assetaccount:   |  |  |                          |   |   |                           |  |  |            |   |   |                      |  |  |                                  |   |   |   |  |  |  |   |   |  |  |  |   |
| Allowancefor doubtfulaccounts: |  |  |                          |   |   |                           |  |  |            |   |   |                      |  |  |                                  |   |   |   |  |  |  |   |   |  |  |  |   |
| Yearended December  31,2006    |  |  |                          | $ | 1,927  |                           |  |  |            | $ | 7,776  |                      |  |  |                                  | $ | (6,674 | ) |  |  |  | $ | 3,029  |  |  |  | 2.9%   |
| Yearended December  31,2005    |  |  |                          |   | 1,301  |                           |  |  |            |   | 5,499  |                      |  |  |                                  |   | (4,873 | ) |  |  |  |   | 1,927  |  |  |  | 2.5%   |
| Yearended December  31,2004    |  |  |                          |   | 785    |                           |  |  |            |   | 4,208  |                      |  |  |                                  |   | (3,692 | ) |  |  |  |   | 1,301  |  |  |  | 2.3%   |
|                                |

Item9.    Changes in and Disagreements With Accountants on Accounting andFinancial Disclosure

None.

Item 9A.    Controls andProcedures

The Company’s Chief Executive Officer andChief Financial Officer have evaluated the effectiveness of theCompany’s disclosure controls and procedures as ofDecember  31,  2006. Based upon such review, the ChiefExecutive Officer and Chief Financial Officer have concluded that theCompany had in place, as of December  31,  2006, effectivecontrols and procedures designed to ensure that information required tobe disclosed by the Company (including consolidated subsidiaries) inthe reports it files or submits under the Securities Exchange Act of1934, as amended, and the rules thereunder, is recorded, processed,summarized and reported within the time periods specified in theCommission’s rules and forms. Disclosure controls and proceduresinclude, without limitation, controls and procedures designed to ensurethat information required to be disclosed by an issuer in reports itfiles or submits under the Securities Exchange Act is accumulated andcommunicated to the Company’s management, including itsprincipal executive officer or officers and principal financial officeror officers, or persons performing similar functions, as appropriate toallow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over FinancialReporting

The Company’s management is responsiblefor establishing and maintaining adequate internal control overfinancial reporting, as such term is defined in Exchange ActRule 13a-15(f). A company’s internal control overfinancial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies andprocedures that (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (ii) provide reasonableassurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures arebeing made only in accordance with authorizations of management anddirectors of the company; and (iii) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition,use or disposition of the company’s assets that could have amaterial effect on the financial statements.

Because of itsinherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controlsmay become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures maydeteriorate.

Under the supervision and with the participation ofthe Company’s principal executive officer and principalfinancial officer, the Company’s management assessed theeffectiveness of the registrant’s internal control overfinancial reporting, as of December  31,  2006 based on theframework in Internal 

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Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the TreadwayCommission. Based on our assessment under the framework in InternalControl – Integrated Framework, our management concluded thatour internal control over financial reporting was effective as ofDecember  31,  2006.

Our management’sassessment of the effectiveness of the Company’s internalcontrol over financial reporting as of December  31,  2006has been audited by PricewaterhouseCoopers LLP, an independentregistered public accounting firm, as stated in their report whichappears herein.

Changes in Internal Controls over FinancialReporting

The Company’s Chief Executive Officer and ChiefFinancial Officer have evaluated any changes in the Company’sinternal control over financial reporting that occurred during thequarter ended December  31,  2006, and have concluded thatthere was no change during such quarter that has materially affected,or is reasonably likely to materially affect, the Company’sinternal control over financial reporting.

Item 9B.    OtherInformation

None.

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PART III

Item 10.    Directorsand Executive Officers

The following table sets forth certaininformation with respect to the Company’s directors andexecutiveofficers.

|                           |  |  |     |  |        |          |  |  |                                                                 |
|---------------------------|--|--|-----|--|--------|----------|--|--|-----------------------------------------------------------------|
| Name                      |  |  | Age |  |        | Position |
| Directors:                |  |  |     |  |   |          |  |  |                                                            |
| RobertS.Silberman         |  |  |     |  | 49     |          |  |  | Chairmanof the Board and Chief Executive Officer                |
| Dr.Charlotte  F.Beason    |  |  |     |  | 59     |          |  |  | Director                                                        |
| William E.Brock           |  |  |     |  | 76     |          |  |  | Director                                                        |
| David A.Coulter           |  |  |     |  | 59     |          |  |  | Director                                                        |
| GaryGensler               |  |  |     |  | 49     |          |  |  | Director                                                        |
| Robert R.Grusky           |  |  |     |  | 49     |          |  |  | Director                                                        |
| Robert L.Johnson          |  |  |     |  | 60     |          |  |  | Director                                                        |
| Todd A.Milano             |  |  |     |  | 54     |          |  |  | Director                                                        |
| G. Thomas Waite,III       |  |  |     |  | 55     |          |  |  | Director                                                        |
| J. DavidWargo             |  |  |     |  | 53     |          |  |  | Director                                                        |
| ExecutiveOfficers:        |  |  |     |  |   |          |  |  |                                                            |
| KarlMcDonnell             |  |  |     |  | 40     |          |  |  | President and ChiefOperating Officer                            |
| Mark C.Brown              |  |  |     |  | 47     |          |  |  | Senior Vice President and Chief FinancialOfficer                |
| Gregory Ferenbach         |  |  |     |  | 47     |          |  |  | SeniorVice President and General Counsel                        |
| Michael J.Fortunato       |  |  |     |  | 43     |          |  |  | Controller                                                      |
| LysaA. Hlavinka           |  |  |     |  | 39     |          |  |  | Senior VicePresident – MarketingandAdministration         |
| Kevin P.O’Reagan    |  |  |     |  | 47     |          |  |  | Vice Presidentand Chief Technology Officer                      |
| Sonya G.Udler             |  |  |     |  | 39     |          |  |  | Vice President – CorporateCommunications                  |
| UniversityOfficers:       |  |  |     |  |   |          |  |  |                                                            |
| Dr.Joel  O.Nwagbaraocha   |  |  |     |  | 64     |          |  |  | InterimUniversity President, Provost, and Chief AcademicOfficer |
| Randi S. Reich            |  |  |     |  | 33     |          |  |  | SeniorVice President – AcademicAdministration             |
| PatriciaArdoline-Pellicci |  |  |     |  | 41     |          |  |  | Vice President –Operations                                |
| Daniel W.Jackson          |  |  |     |  | 32     |          |  |  | Vice President –Operations                                |
| James F. McCoy            |  |  |     |  | 47     |          |  |  | VicePresident – Operations                                |
| ReginaldRainey            |  |  |     |  | 39     |          |  |  | Vice President –Operations                                |
|                           |

Directors

Mr.Robert  S.  Silberman has been Chairman of the Boardsince February  2003 and Chief Executive Officer sinceMarch  2001. From 1995 to 2000, Mr.  Silberman served in avariety of senior management positions at CalEnergy Company, Inc.,including as President and Chief Operating Officer. From 1993 to 1995,Mr.  Silberman was Assistant to the Chairman and Chief ExecutiveOfficer of International Paper Company. From 1989 to 1993, Mr.Silberman served in several senior positions in the U.S. Department ofDefense, including as Assistant Secretary of the Army. Mr.Silberman has been a Director of Strayer since March  2001. Heserves on the Board of Directors of Covanta Holding Company, NewPageHolding Corporation, and on the Management Advisory Board of NewMountain Capital, LLC. He also serves on the Board of Visitors of TheJohns Hopkins University 

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School of Advanced International Studies.Mr.  Silberman is a member of the Council on Foreign Relations.Mr.  Silberman holds a bachelor’s degree in history fromDartmouth College and a master’s degree in international policyfrom The Johns Hopkins University.

Dr.  CharlotteF.  Beason is a former consultant in education and healthcare administration. From 1988 to 1996, she was Director of HealthProfessions Education Service and the Health Professional ScholarshipProgram at the Department of Veterans Affairs. From 2000 to 2003,Dr.  Beason was Chair and Vice Chair of the Commission onCollegiate Nursing Education (an autonomous agency accreditingbaccalaureate and graduate programs in nursing). She is also a memberof the Accreditation Review Committee of the American NursesCredentialing Commission. Dr.  Beason has served on the Boardsince 1996 and is a member of the Nominating/Governance Committee ofthe Board. She is also Chairwoman of the Strayer University Board ofTrustees. Dr.  Beason holds a bachelor’s degree in nursingfrom Berea College, a master’s degree in psychiatric nursingfrom Boston University and a doctorate in clinical psychology andpublic practice from Harvard University.

Mr. William E.Brock is the Founder and Chairman of the Brock Offices, a firmspecializing in international trade, investment and human resources.From 1985 to 1987, Mr.  Brock served in the President’sCabinet as the U.S. Secretary of Labor, and from 1981 to 1985, as theU.S. Trade Representative. Elected Chairman of the Republican NationalCommittee from 1977 to 1981, Mr.  Brock previously served as aMember of Congress and, subsequently, as U.S. Senator for the State ofTennessee. Mr.  Brock serves as a Counselor and Trustee of theCenter for Strategic and International Studies, and as a member of theBoard of Directors of On Assignment, Inc., and Health Extras, Inc., andResCare, Inc. Mr.  Brock has been a member of the Board since2001 and is Chair of the Nominating/Governance Committee of the Board.He holds a bachelor’s degree in commerce from Washington and LeeUniversity. Mr.  Brock has also received a number of honorarydegrees.

Mr.  David  A.  Coulter iscurrently Managing Director and Senior Advisor at Warburg Pincus, LLC.He was Vice Chairman of J.P. Morgan & Chase Co. fromDecember  2000 to December  2005. Mr.  Coulter wasVice Chairman of The Chase Manhattan Corporation from July  2000to December  2000. Prior to joining Chase, Mr.  Coulter ledthe West Coast operations of the Beacon Group, a private investment andstrategic advisory firm, and prior to that, Mr.  Coulter servedas the Chairman and Chief Executive Officer of the BankAmericaCorporation. Mr.  Coulter is a member of the Board of Directorsof PG&E Corporation, First Data Corporation and the Irvine Company.Mr.  Coulter is currently serving as the Presiding IndependentDirector of the Strayer Education, Inc. Board of Directors, on which hehas served since 2002. Mr.  Coulter holds a bachelor’sdegree in mathematics and economics and a master’s degree inindustrial administration, both from Carnegie Mellon University.

Mr.  Gary  Gensler served as Under Secretary ofthe U.S. Department of the Treasury from 1999 to 2001, and as AssistantSecretary of the Treasury from 1997 to 1999. From 1988 to 1997,Mr.  Gensler was a partner of The Goldman Sachs Group, LP, wherehe served in various capacities including Co-head of Finance,responsible for controllers and treasury worldwide. He serves as aTrustee of the Baltimore Museum of Art, the Bryn Mawr School, andEnterprise Community Partners, and is a member of the Board of Visitorsof the University of Maryland, Baltimore County, and the Board of TheJohns Hopkins Center for Talented Youth as well as the Board ofWageWorks, Inc., and the Washington Hospital Center. Mr.  Gensleralso serves on the Management Advisory Board of New Mountain Capital,LLC. Mr.  Gensler has served on the Board since 2001 and is Chairof the Audit Committee of the Board. Mr.  Gensler holds abachelor’s degree in economics and an MBA from the WhartonSchool of the University of Pennsylvania.

Mr.Robert  R.  Grusky is the Founder and Managing Memberof Hope Capital Management, LLC, an investment manager, since 2000. Heco-founded New Mountain Capital, LLC, a private equity firm, in 2000and was a Principal and Member from 2000 to 2005, and has been a SeniorAdvisor since then. From 1998 to 2000, Mr.  Grusky served asPresident of RSL Investments Corporation. From 1985 to 1997, with theexception of 1990 to 1991 when he was on a leave of absence to serve asa White House Fellow and Assistant for Special Projects to theSecretary of Defense, Mr.  Grusky served in a variety ofcapacities at Goldman, Sachs & Co., first in its Mergers &Acquisitions Department and 

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then in its Principal Investment Area. He isalso on the Board of Directors of AutoNation, Inc., and NationalMedical Health Card Systems, Inc., as well as a member of the Board ofTrustees of Hackley School. Mr.  Grusky has served on the Boardsince 2001, and is a member of the Audit Committee of the Board. Heholds a bachelor’s degree in history from Union College and anMBA from Harvard University.

Mr.  RobertL.  Johnson is the Chairman and Chief Executive Officer ofRLJ Companies, where he owns or holds interests in companies operatingin the professional sports, hospitality, real estate, gaming, bankingand financial services, and film production industries. Mr.Johnson is the founder of Black Entertainment Television (BET), asubsidiary of Viacom and the leading African-American operated mediaand entertainment company in the United States, and served as its ChiefExecutive Officer until January  2006. In 2002, Mr.Johnson became the first African-American majority owner of a majorsports franchise, the Charlotte Bobcats of the NBA. From 1976 to 1979,he served as Vice President of Governmental Relations for the NationalCable & Telecommunications Association (NCTA). Mr.  Johnsonalso served as Press Secretary for the Honorable Walter E. Fauntroy,Congressional Delegate from the District of Columbia. He alsoserves on the following boards: NBA Board of Governors, The JohnsHopkins University, Lowe’s Companies, IMG, Deutsch Bank AdvisoryBoard, Wal-Mart Diversity Committee, and the BusinessCouncil. Mr.  Johnson has served on the Board since 2003,and is a member of the Compensation Committee of the Board. He holds abachelor’s degree in social studies from the University ofIllinois and a master’s degree in international affairs from theWoodrow Wilson School of Public and International Affairs at PrincetonUniversity.

Mr.  Todd  A.  Milano hasbeen President and Chief Executive Officer of Central PennsylvaniaCollege since 1989. Mr.  Milano has served on the Board since1996 and is a member of the Compensation Committee of the Board and isalso a member of the Strayer University Board of Trustees. Mr.Milano holds a bachelor’s degree in industrial management fromPurdue University.

Mr.  G.  Thomas Waite, IIIhas been Treasurer and Chief Financial Officer of the Humane Society ofthe United States since 1993. In 1992, Mr. Waite was the Director ofCommercial Management of The National Housing Partnership. Mr. Waitehas served on the Board since 1996, is a member of the Audit Committeeof the Board and is also a member of the Strayer University Board ofTrustees. Mr. Waite holds a bachelor’s degree in commerce fromthe University of Virginia and is a Certified Public Accountant.

Mr.  J.  David Wargo is a co-founder and has beena Member of New Mountain Capital, LLC, since January  2000. Since1993, Mr. Wargo has also been President of Wargo and Company, Inc., aninvestment management company. From 1989 to 1992, Mr. Wargo was aManaging Director and Senior Analyst of The Putnam Companies, aBoston-based investment management company. From 1985 to 1989, Mr.Wargo was a partner and held other positions at Marble Arch Partners.Mr. Wargo is a Director of Liberty Global, Inc., Discovery HoldingCompany and OpenTV Corporation. Mr. Wargo has served on the Board since2001 and is Chair of the Compensation Committee of the Board. Mr. Wargoholds a bachelor’s degree in physics and a master’sdegree in nuclear engineering, both from the Massachusetts Institute ofTechnology. He also holds a master’s degree in management fromthe Sloan School of Management, Massachusetts Institute ofTechnology.

Executive Officers

Mr.  KarlMcDonnell joined Strayer Education in July  2006 as Presidentand Chief Operating Officer. Previously, he served as Chief OperatingOfficer of InteliStaf Healthcare, Inc., one of the nation’slargest privately-held healthcare staffing firms. Prior to his tenureat InteliStaf, he served as Vice President of the Investment BankingDivision at Goldman, Sachs & Co. Mr.  McDonnell has heldsenior management positions with several Fortune 100 companies,including The Walt Disney Company. Mr.  McDonnell holds abachelor’s degree in political science and American history fromVirginia Wesleyan College and an MBA from DukeUniversity.

Mr.  Mark  C.  Brown joinedStrayer in September  2001 as Senior Vice President and ChiefFinancial Officer. Mr.  Brown was most recently the ChiefFinancial Officer of the Kantar Group, the information and consultancydivision of WPP Group, a multi-national communications services

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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 Groupand Business Unit Chief Financial Officer for Pepsi-Cola International.Mr.  Brown is a Certified Public Accountant who started hiscareer with PricewaterhouseCoopers, LLP. Mr.  Brown holds abachelor’s degree in accounting from Duke University and an MBAfrom Harvard University.

Mr.  GregoryFerenbach has served as Senior Vice President and General Counselfor the Company since September  2006. Mr.  Ferenbachjoined Strayer in 2002 and was previously General Counsel of StrayerUniversity where he was responsible for obtaining regulatory approvalsto begin operations in new states. Mr.  Ferenbach has more than20 years of experience in the practice of law. Prior to joiningStrayer, Mr.  Ferenbach was Senior Vice President and GeneralCounsel to the Public Broadcasting Service (PBS) for 10 years and anattorney in corporate practice at the law firms of Piper & Marburyin Baltimore, Md., and Dow, Lohnes & Albertson in Washington, D.C.Mr.  Ferenbach holds a bachelor’s degree in history fromYale University and a juris doctorate degree from the University ofVirginia.

Mr.  Michael  J.  Fortunatojoined Strayer as its Controller in September  2002. Prior tojoining Strayer, Mr.  Fortunato spent 17 years working in avariety of industries including health care, real estate, internationalinvesting and software development. Mr.  Fortunato began hiscareer with the accounting firm KPMG Peat Marwick. He holds abachelor’s degree in business administration from Loyola Collegeand is a Certified Public Accountant.

Ms.  LysaA.  Hlavinka is Senior Vice President – Marketing andAdministration. Ms.  Hlavinka has been working in the for-profiteducation field for the past 17 years and joined Strayer in May2001 as Vice President – Marketing. Ms.  Hlavinka startedher career as an account executive at an advertising agency and joinedthe University of Phoenix in 1990. As that company grew, Ms.Hlavinka held positions as Marketing Manager, Director ofAdministrative Services, and, most recently, National Director ofAdvertising. She has taught marketing and public relations classes bothat the University of Phoenix and Strayer University. Ms.Hlavinka holds a bachelor’s degree in advertising from ArizonaState University and an MBA from the University of Phoenix.

Mr.  Kevin  P.  O’Reagan is VicePresident and Chief Technology Officer. He has been active in thetechnology field for more than 20 years and joined Strayer inJuly  2001. Mr.  O’Reagan started his career withAndersen Consulting and later joined Prudential Mortgage as theDirector of Technology. Prior to joining Strayer, he held a number ofIT management positions including Chief Technology Officer of the RIAGroup of the Thompson Corporation. Prior to joining Strayer, Mr.O’Reagan developed and taught courses at the post-graduate levelas an adjunct faculty member at The Johns Hopkins University in itsInformation Technology Program. Mr.  O’Reagan holds abachelor’s degree in information systems management from theUniversity of Maryland and a master’s degree in technology fromThe Johns Hopkins University.

Ms.  SonyaG.  Udler is Vice President, Corporate Communications.Ms.  Udler joined Strayer in 2002, and brings more than 15 yearsof public relations and marketing communications experience to Strayer.For the two years prior to joining Strayer, she served as a publicrelations and media strategies consultant. She previously served asSenior Vice President at Young & Associates, Inc., a publicrelations agency, where she developed communications strategies andmedia programs for Bell Atlantic, Siemens, Verizon and other leadingtechnology companies. Ms.  Udler holds a bachelor’s degreein journalism from the University of Maryland.

UniversityOfficers

Dr.  Joel  O.  Nwagbaraochaserves as Interim University President, Provost, and Chief AcademicOfficer. Dr.  Nwagbaraocha joined Strayer University in 1994 asAdjunct Faculty. He has since held several positions at the University,including Campus Dean. Dr.  Nwagbaraocha has more than 35 yearsof experience as an academician, education administrator andeducation consultant. Prior to joining Strayer, he was President ofBarber-Scotia College in Concord, N.C. Dr.  Nwagbaraocha advisesgraduate students at Strayer University’s WashingtonCampus on their Directed Research Projects and 

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teaches education courses at the campus. Heholds a bachelor’s degree in mathematics from Norfolk StateUniversity and master’s and doctoral degrees ineducation planning and management from HarvardUniversity.

Ms.  Randi  S.  Reich isSenior Vice President – Academic Administration. Ms.  Reichhas been with the University for six years and has served as Directorof Online Operations, Director of Business Processes, Director of NewCampus Openings, and as an Adjunct Faculty Member. Prior to joiningStrayer in 2001, Ms.  Reich co-founded and managed business andstrategic development for Mascot Network, an application serviceprovider serving the higher education market. Ms.  Reich alsoserved several years in city government with the City of New York asthe Assistant Director in the Mayor’s Office of Transportation.Ms.  Reich holds a bachelor’s degree in psychology andpolitical science from the University of Pennsylvania and an MBA fromHarvard University.

Ms.  PatriciaArdoline-Pellicci is Vice President – Operations. Ms.Ardoline-Pellicci has been with Strayer University for 15 years, andhas served in a variety of roles, including Financial Aid Manager,Student Services Manager, University Bursar, Campus Manager, andRegional Director. Ms.  Ardoline-Pellicci holds abachelor’s degree in communications from Marywood College and anMBA from Strayer University.

Mr.  Daniel W. Jacksonis Vice President – Operations. Mr.  Jackson has been withthe University since 2003, previously holding the positions of Directorof Business Operations, Manager of Financial Analysis, Campus Directorand as an Adjunct Faculty Member. Mr.  Jackson has overnine years of experience in proprietary education, including roles asEquity Research Associate at Legg Mason Wood Walker, and Director ofOperations at Fairmont Schools, Inc.   Mr. Jackson holdsa bachelor’s degree in international affairs from the Universityof Colorado at Boulder and an MBA from GeorgetownUniversity.

Mr.  James  F.  McCoy isVice President – Operations. Mr.  McCoy has been active inproprietary education for the past 22 years and joined Strayer in 1994.He has served in a variety of roles, including as a Faculty Member,Campus Dean and Campus Director. Mr.  McCoy holds abachelor’s degree in political science from Landor Universityand an MBA from Strayer University.

Mr.Reginald  Rainey is Vice President – Operations.Mr.  Rainey has been with Strayer University for 20 years and hasheld a number of positions, including Campus Director. Mr.Rainey holds a bachelor’s degree in accounting from StrayerUniversity.

Audit Committee and Audit Committee FinancialExpert

The Company has a separately-designated standing AuditCommittee established in accordance with section 3(a)(58)(A) of theExchange Act. The Audit Committee is composed of Gary Gensler, RobertR. Grusky and G. Thomas Waite, each of whom are independent as thatterm is used in Item 7(d)(3)(IV) of Schedule 14A under the ExchangeAct.

The Board of Directors has determined that Gary Genslerqualifies as an ‘‘audit committee financialexpert,’’ as defined by SEC regulations, based on hiseducation, experience and background.

Section 16(a) BeneficialOwnership Reporting Compliance

The Securities Exchange Act of1934 requires the Company’s directors, executive officers and10% stockholders to file reports of beneficial ownership ofequity securities of the Company and to furnish copies of such reportsto the Company. Based on a review of such reports, and upon writtenrepresentations from certain reporting persons, the Company believesthat, during the fiscal year ended December  31,  2006, allsuch filing requirements were met.

Code of Ethics

TheBoard of Directors adopted a Code of Ethics in February  2004,meeting the requirements of Section 406 of the Sarbanes-Oxley Act of2002 and applicable NASDAQ requirements. The Company will provide toany person without charge, upon request, a copy of such Code of Ethics.Copies are 

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also available on our website,www.strayereducation.com in the Investor Relations section. Personswishing to make such a request should contact Sonya G. Udler, VicePresident of Corporate Communications, 1100 Wilson Blvd. Suite 2500,Arlington, VA 22209, (703) 247-2500. In the event that we make anyamendment to, or grant any waiver from, a provision of the Code ofEthics that applies to our principal executive officer, principalfinancial officer, principal accounting officer or controller andrequires disclosure under applicable SEC rules, we intend to disclosesuch amendment or waiver and the reasons for the amendment or waiver onour website, located at www.strayereducation.com, and as required byNASDAQ, file a Current Report on Form 8-K with the SEC reporting theamendment or waiver.

Item 11.    ExecutiveCompensation

The information required by this Item is herebyincorporated by reference from the information to be contained in theCompany’s Proxy Statement, which will be filed no later than 120days following December  31,  2006.

Item12.    Security Ownership of Certain Beneficial Owners andManagement

The information required by this Item is herebyincorporated by reference from the information contained under thecaption ‘‘Beneficial Ownership of CommonStock’’ in the Company’s Proxy Statement, whichwill be filed no later than 120 days following December31,  2006.

Item 13.    Certain Relationships andRelated Transactions

The information required by this Item ishereby incorporated by reference from the information contained underthe caption ‘‘Certain Transactions with RelatedParties’’ in the Company’s Proxy Statement, whichwill be filed no later than 120 days following December  31,2006.

Item 14.    Principal Accounting Fees andServices

Set forth below are the services rendered and relatedfees billed by PricewaterhouseCoopers, LLP for 2005 and 2006. All ofsuch services have been pre-approved by the Company’s AuditCommittee.

|                                       |  |  |      |   |         |      |  |  |  |   |         |  |
|---------------------------------------|--|--|------|---|---------|------|--|--|--|---|---------|--|
|                                  |  |  | 2005 |   |         | 2006 |
| AuditFees                             |  |  |      |   |    |      |  |  |  |   |    |  |
| Recurring:                            |  |  |      |   |    |      |  |  |  |   |    |  |
| Consolidatedfinancial statementsaudit |  |  |      | $ | 354,000 |      |  |  |  | $ | 375,000 |  |
| Nonrecurring:                         |  |  |      |   |    |      |  |  |  |   |    |  |
| Implementation ofFAS 123(R)           |  |  |      |   | — |      |  |  |  |   | 39,625  |  |
| Other                                 |  |  |      |   | 3,310   |      |  |  |  |   | 5,610   |  |
|                                  |  |  |      |   | 357,310 |      |  |  |  |   | 420,235 |  |
| TaxFees                               |  |  |      |   |    |      |  |  |  |   |    |  |
| Preparation of corporatetaxreturns    |  |  |      |   | 28,950  |      |  |  |  |   | 33,000  |  |
| AllOther Fees                         |  |  |      |   |    |      |  |  |  |   |    |  |
| License fee foraccountingdatabase     |  |  |      |   | 1,000   |      |  |  |  |   | 1,500   |  |
|                                  |  |  |      | $ | 387,260 |      |  |  |  | $ | 454,735 |  |
|                                       |

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PART IV

Item 15.    Exhibitsand Financial Statement Schedules

(A)(1) FinancialStatements

All required financial statements of the registrantare set forth under Item 8 of this report on Form 10-K.

(A)(2)Financial Statement Schedules

All required financial statementschedules of the registrant are set forth under Item 8 of this reporton Form 10-K.

(A)(3) Exhibits

|               |  |  |                                                                                                                                                                                                                                                                    |
|---------------|--|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  | Description                                                                                                                                                                                                                                                        |
| 3.01          |  |  | Amended Articles of Incorporation and Articles Supplementary of theCompany (incorporated by reference to Exhibit 3.01 of theCompany’s Annual Report on Form  10-K filed with theCommission on March  28,2002).                                               |
| 3.02          |  |  | Amended and Restated Bylaws ofthe Company (incorporated by reference to Exhibit 3.02 of theCompany’s Registration Statement on Form S-1 (File No. 333-3967)filed with the Commission on May  17,1996).                                                       |
| 4.01          |  |  | Specimen Stock Certificate(incorporated by reference to Exhibit 4.01 of Amendment No. 3 to theCompany’s Registration Statement on Form S-1 (File No. 333-3967)filed with the Commission on July  16,1996).                                                   |
| 10.03         |  |  | Employment Agreement, dated asof April  6,  2001, between Strayer Education, Inc. andRobert S. Silberman (incorporated by reference to Exhibit 10.03 of theCompany’s Annual Report on From 10-K filed with the Commissionon March  28,  2002).               |
| 10.04         |  |  | 1996Amended Stock Option Plan (incorporated by reference to Exhibit B ofthe Company’s Proxy Statement filed with the Commission onApril  27,  2001 and Exhibits B  & C to theCompany’s Proxy Statement filed with the Commission on April 3,2006). |
| 21.01         |  |  | Subsidiaries of Registrant(incorporated by reference to Exhibit 21.01 of the Company’sAnnual Report on Form 10-K filed with the Commission on March28,  2002).                                                                                               |
| 23.1*         |  |  | Consent ofPricewaterhouseCoopers LLP.                                                                                                                                                                                                                              |
| 24.1*         |  |  | Power ofAttorney (included in signature pagehereto).                                                                                                                                                                                                               |
| 31.1*         |  |  | Certification of ChiefExecutive Officer pursuant to Rule 13a-14(a) of the SecuritiesAct.                                                                                                                                                                           |
| 31.2*         |  |  | Certification of Chief FinancialOfficer pursuant to Rule 13a-14(a) of the SecuritiesAct.                                                                                                                                                                           |
| 32.1*         |  |  | Certification of Chief ExecutiveOfficer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of2002.                                                                                                                    |
| 32.2*         |  |  | Certification of Chief FinancialOfficer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of2002.                                                                                                                    |
|               |

|  |
|--|
|  |  |
|  |

|   |                |
|---|----------------|
| * | Filedherewith. |

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SIGNATURES

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this Report to be signed onits behalf by the undersigned, thereunto dulyauthorized.

|  | STRAYER EDUCATION,INC. |
|--|------------------------|

|  | By: /s/ Robert S.Silberman |
|--|----------------------------|

|  | Robert S.SilbermanChairman of the Board and Chief ExecutiveOfficer |
|--|--------------------------------------------------------------------|

Date:    February 27, 2007

POWER OFATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whosesignature appears below constitutes and appoints Robert S. Silbermanand Gregory Ferenbach and Mark C. Brown, and each of them individually,as his true and lawful attorneys-in-fact and agents, with full power ofsubstitution and resubstitution, for him and his name, place and steadin any and all capacities, to sign the report and any and allamendments to this report, and to file the same, with all exhibitsthereto, and other documents in connection therewith, with theSecurities and Exchange Commission, granting unto saidattorneys-in-fact and agents, full power and authority to perform eachand every act and thing requisite and necessary to be done in and aboutthe premises, as fully to all intents and purposes as he might or coulddo in person, hereby ratifying and confirming all that saidattorneys-in-fact and agents, or their substitutes, may lawfully do orcause to be done by virtue thereof.

Pursuant to the requirementsof the Securities Exchange Act of 1934, this Report has been signedbelow by the following persons on behalf of the registrant in thecapacities and on the dateindicated.

|                        |  |                                                                             |  |                   |
|------------------------|--|-----------------------------------------------------------------------------|--|-------------------|
| SIGNATURES             |  | TITLE                                                                       |  | DATE              |
|                        |
| /s/Robert S. Silberman |  | Chairman of the Board andChiefExecutive Officer(Principal ExecutiveOfficer) |  | February 27, 2007 |
|                        |
| (Robert S.Silberman)   |
|                        |
| /s/Mark C. Brown       |  | ChiefFinancial Officer(Principal Financial andAccountingOfficer)            |  | February 27, 2007 |
|                        |
| (Mark C. Brown)        |
|                        |
| /s/Charlotte F. Beason |  | Director                                                                    |  | February 27,2007  |
|                        |
| (Charlotte F. Beason)  |
|                        |
| /s/ William E.Brock    |  | Director                                                                    |  | February 27,2007  |
|                        |
| (William E.Brock)      |
|                        |
| /s/ David A. Coulter   |  | Director                                                                    |  | February 27,2007  |
|                        |
| (DavidA. Coulter)      |
|                        |
| /s/ Gary Gensler       |  | Director                                                                    |  | February 27,2007  |
|                        |
| (GaryGensler)          |
|                        |
| /s/ Robert R.Grusky    |  | Director                                                                    |  | February 27,2007  |
|                        |
| (Robert R.Grusky)      |
|                        |
| /s/ Robert L.Johnson   |  | Director                                                                    |  | February 27,2007  |
|                        |
| (Robert L. Johnson)    |
|                        |

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|                         |  |          |  |                  |
|-------------------------|--|----------|--|------------------|
| SIGNATURES              |  | TITLE    |  | DATE             |
|                         |
| /s/ Todd A.Milano       |  | Director |  | February 27,2007 |
|                         |
| (Todd A.Milano)         |
|                         |
| /s/ G. Thomas Waite,III |  | Director |  | February 27,2007 |
|                         |
| (G. Thomas Waite,III)   |
|                         |
| /s/ J. David Wargo      |  | Director |  | February 27,2007 |
|                         |
| (J.David Wargo)         |
|                         |

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