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Pearson Will Pay $1 Million Fine For ‘Understating’ 2018 Data Breach, Misleading Investors

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Education giant Pearson will pay a $1 million fine to settle charges that it misled investors about a 2018 data breach during which millions of student records were stolen. 

The U.S. Securities and Exchange Commission announced earlier this month that the London-based, multinational educational publishing and software provider “made misleading statements and omissions” to downplay the Chinese hack, which affected 13,000 school, district, and university customers.

Pearson misrepresented the incident, which had already happened, as a hypothetical risk in its July 2019 semi-annual report, the SEC found. Around the same time, the company also said in a media statement that the intrusion may have included dates of birth and email addresses, despite already knowing they were stolen.

The media statement left out millions of rows of student data, usernames, and passwords that were stolen. And Pearson claimed to have “strict protections” in place when in reality it failed to patch the vulnerability for six months, according to the SEC. 

“Pearson opted not to disclose this breach to investors until it was contacted by the media, and even then Pearson understated the nature and scope of the incident, and overstated the company’s data protections,” said Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, in a press release.

“As public companies face the growing threat of cyber intrusions, they must provide accurate information to investors about material cyber incidents.”

Pearson agreed to pay the civil penalty “without admitting or denying the SEC’s findings.”

In an emailed statement, the company said told EdWeek Market Brief it is “pleased to resolve this matter with the SEC.”

The only Pearson product targeted by the Chinese hackers starting in November 2018 — the AIMSweb 1.0 software platform — was retired in July 2019 as part of a previously scheduled plan, according to the company. The web-based software was a tool for entering and tracking students’ academic performance.

“Protecting our customers’ information is of critical importance to us,” said Laura Howe, senior vice president of global communications for Pearson, in an email statement. “Pearson continues to enhance its cyber security efforts to minimize the risk of cyberattacks in an ever-changing threat landscape.” 

The 2018 hack was part of a decade-long, global cyberattack that targeted the intellectual property and confidential business information of companies across a wide variety of industries, including COVID-19 research, according to the Department of Justice.

The federal government indicted two suspects last year, former engineering students in China who allegedly stole hundreds of millions of dollars of trade secrets, intellectual property, and other valuable information, sometimes on behalf of the Chinese government’s Ministry of State Security.

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Broad Congressional Proposal Would Raise Data Privacy Bar for Ed-Tech Companies

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Broad Congressional Proposal Would Raise Data Privacy Bar for Ed-Tech Companies

A recently released congressional proposal would trigger a swath of new requirements for how ed-tech companies handle K-12 student data they collect, and establish an independent auditing process for their data protection practices.

The drafter of the proposed measure, Rep. Lori Trahan, D-Mass., is seeking input from ed-tech companies and other members of the K-12 community on what language should ultimately be included in final legislation she plans to introduce later this year.

The proposal suggests limiting usage of student data collected by education businesses in several ways, including prohibiting targeted advertising involving students’ personal information, and banning the sale of student data except in cases of company acquisitions and sales of test-score reports for college recruitment.

Trahan presented the proposed language to allow commercial transactions for test score data as one of several points of discussion for parents, educators, students, and industry, as her office works to craft a final bill sometime around early winter, she told EdWeek Market Brief in an interview.

Sale of test score data can be a contentious issue.

Privacy advocates often argue that assessment companies don’t thoroughly inform students and parents when selling data to colleges and scholarship providers. On the flip side, some civil rights advocates  assert that colleges’ purchases of test score data are useful for enrolling students from low-income school districts who may get overlooked by traditional recruitment efforts, Trahan noted.

“I believe that we can strike a thoughtful balance, and making this a point of discussion as we work on an updated draft of the legislation is key to achieving that,” she said.

Commenters have until Oct. 31 to provide input for final legislation to be introduced later this year.

In addition to prohibiting certain uses of student data, the draft legislation also outlines several allowable cases of student data disclosure for companies, including to ensure legal and regulatory compliance, participation in the judicial process, and research purposes allowed by federal or state law.

Trahan wants companies to share their views on the issue of allowable disclosure, including their experiences navigating state laws that trigger disclosure of student information, she said.

Small and midsize companies should also comment on the draft’s provision to establish “technology impact assessments” that examine the student-data collection practices of ed-tech companies, Trahan said.

The draft would task the Federal Trade Commission with organizing a process for technology impact assessments to be conducted by independent auditors of any education company deemed to host “high-risk” platforms for student data protection purposes.

Defining “High-Risk”

The draft bill defines several criteria for what would constitute “high-risk.”

Those  criteria include software platforms that pose a significant risk to privacy or security of students; store personal student information regarding race, national origin, political opinions, religion, sexual orientation, and criminal convictions; and, platforms that present the possibility of an inaccurate, unfair, biased, or discriminatory decision that impacts a student.

The independent technology impact assessments would be required to describe the data that companies collect, provide a risk analysis considering harms to students, discrimination, and accessibility; and, explain companies’ risk mitigation processes.

The draft bill identifies the provision for independent auditors to conduct technology impact assessments as a point of discussion for K-12 stakeholders to have in the leadup to a final bill.

Ed tech, including artificial intelligence-influenced ed tech, is not subject to the same certification requirements as other critical industries, such as the legal and accounting professions, which require many practitioners to undergo continuing education and outside auditing processes, Trahan said.

“Ideally, legislation like ours could provide the incentive to scholars and standards-making bodies to create a certified [ed tech] industry,” she said. “But you don’t arrive there until you hear from small and midsized companies so that we can understand the burden that may come with them hiring potentially expensive, and currently uncertified auditors.”

Though the draft bill  has not been formally introduced in Congress yet, Trahan hopes to work across party lines, as well as with lawmakers interested in relevant tech topics like AI, as her office draws up final legislation. Twenty-seven House lawmakers compose the bipartisan Congressional AI Caucus.

The draft measure is “extremely comprehensive,” and the public participation process will allow the K-12 community to address any potential gaps they might see in the legislation, said Ariel Fox, senior counsel for global policy at Common Sense Media.

Fox lauded the proposal for  establishing a formal process for external audits of companies’ data protection practices. In recent years, such provisions have generally been left out of ed-tech legislation proposed within the U.S.

The impact assessment provisions draw from language embedded in the EU’s General Data Protection Regulation, or GDPR, and the UK’s Age Appropriate Design Code. Both of those regulations direct companies covered by the regulations to deeply vet how their software impacts users’ privacy.

“A concept that we see a lot in international laws is this notion that companies should really take a hard look at what they’re doing with data, what they’re collecting, why they’re collecting it,” Fox said. “It’s exciting to see that in her proposal as well.”

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In Their Own Words: What Students Want From Ed-Tech Products

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EdWeek Market Brief talked with two tech-savvy students about where digital products meet their needs, and fall short.

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Mississippi District Seeking Assessment Platform; N.Y. District Looks For Pre-K Provider

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K-2 assessment platform, pre-K program provider, and online curriculum. A Mississippi school district is looking to buy a system to develop formative and summative tests for K-2 while a district in downstate New York seeks pre-K services. And a district in Utah looks for K-8 online curriculum.

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Inside One Education Company’s Efforts to Organize a Product Around Learning Recovery

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Houghton Mifflin Harcourt is one of many companies across the K-12 market that has sought to create products to help districts address academic remediation for students who have fallen behind during COVID.

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K-12 Dealmaking: GoGuardian Acquires Formative Assessment Platform; Tutoring Startup Becomes Europe’s Latest Unicorn

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GoGuardian, which provides a suite of classroom management and student safety solutions, has acquired Edulastic, the companies announced this week.

Edulastic describes itself as a next-generation formative online assessment platform that helps teachers quickly identify learning gaps, give students differentiated assignments to meet individual learning needs, and monitors students’ progress on the way to standards mastery.

The acquisition will advance Los Angeles-based GoGuardian’s mission to create the “ultimate learning platform,” the announcement says.

“Gauging student understanding is a vital element of effective teaching and learning. The Edulastic team has created sophisticated, data-driven solutions that provide teachers with real-time, actionable insights that support great teaching and improved outcomes,” GoGuardian co-founder and CEO Advait Shinde said in a statement. “We couldn’t be more excited to welcome the talented Edulastic team into the GoGuardian family.”

The companies estimate that the acquisition will allow their combined platform to reach one out of three K-12 students nationwide. GoGuardian already serves over 20 million students in more than 14 million schools, and Edulastic is used by more than 9 million students at more than 19,000 schools, according to the announcement.

“Since our founding, Edulastic has been on a mission to deliver insights that help teachers teach and help students learn,” Edulastic co-founder and CEO Madhu Narasa said in a statement. “GoGuardian is a natural fit that will accelerate our mission and expand our ability to serve educators, now and long into the future.”

The acquisition was led by GoGuardian and Sumeru Equity Partners, a technology-focused growth capital firm that first invested in GoGuardian in 2018. Edulastic is backed by early-stage venture capital firm Primera Capital.

Austrian tutoring startup announces investment, ‘unicorn’ status. After receiving a $244.4 million Series C investment led by DST Global, GoStudent announced it is Europe’s latest ed-tech unicorn and the highest-valued ed-tech company in Europe, according to an announcement.

The company is now valued at $1.7 billion, or €1.4 billion.

GoStudent, which is based in Vienna and provides one-to-one video-based online tutoring, also saw investments this round from SoftBank Vision Fund 2, Tencent, Dragoneer, Coatue, Left Lane Capital, and DN Capital.

The investment will be used to drive global expansion, according to the announcement. GoStudent is currently used in 15 countries, has expanded its team to more than 500 employees, and has opened 12 new offices, adding new locations in Athens, Istanbul, and Amsterdam.

The company aims to be present in over 20 countries by the end of 2021, planning to launch in Canada and Mexico this summer, and also intends to invest in branding, product development, and company acquisitions. GoStudent will also double its team to over 1,000 employees this year, the company said.

GoStudent grows by a rate of approximately 30 percent month-over-month, according to the announcement.

“At the heart of GoStudent is our mission to build the No. 1 Global School,” GoStudent co-founder and CEO Felix Ohswald said in a statement. “The new investment and the resulting opportunities for continued international growth bring us one step closer to fulfilling our mission.”

Apax Digital Fund invests in Revolution Prep. Private equity firm Apax Digital Fund will invest in online tutoring platform Revolution Prep, Apax announced.

The announcement doesn’t give a specific figure, but refers to the infusion as a “growth investment” that will allow Revolution Prep to expand its offering and increase access to world-class online tutoring.

The investment will enable Revolution Prep to make professional tutors available to more students in the U.S. and beyond, the announcement says. Over 1 million families have used the service.

“The pandemic has accelerated the shift from traditional to online learning and we’re continuing to see strong demand even as society is re-opening,” Revolution Prep CEO Matt Kirchner said in a statement. Apax Digital’s “investment will support an acceleration of our key growth priorities, including scaling up the more affordable small group tutoring format and the strategic expansion into the middle school tutoring segment, supporting families earlier in their academic journeys.”

Apax Digital Fund was attracted by Revolution Prep’s “cutting-edge” technology platform, longstanding partnerships with schools, and breadth and expertise of its tutors, Marcelo Gigliani, managing partner of Apax Digital said in a statement.

Lincoln International was the exclusive financial adviser to Revolution Prep in connection with the transaction.

ETS Strategic Capital and GSV Ventures invest in Degreed. Princeton, N.J.-based ETS Strategic Capital, the venture capital arm of research and assessment organization ETS, is joining GSV Ventures to invest in Degreed, a workforce upskilling company used by about one in three Fortune 50 companies, according to an announcement.

The investment is aimed to continue to advance and grow ETS’s educational business and mission through high-growth dealmaking, the announcement says.

San Francisco-based Degreed received a $153 million Series D funding round led by Sapphire Ventures and Riverwood Capital in April.

“Our investment in Degreed will help us to continue to leverage high-growth companies who are aligned to the business and mission of ETS and grow globally as an organization,” Ralph Taylor-Smith, managing director of ETS Strategic Capital, said in a statement. “The corporate learning, workforce development and reskilling/upskilling sector is a key new business growth area for ETS.”

The announcement cites a study by Statistia showing that $82.5 billion was invested in workplace training in the U.S. in 2020.

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How One Company Adapted Its PD for COVID and Beyond: A Case Study

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Achieve3000’s efforts during the pandemic offer a window into how education businesses have sought to overhaul support for teachers to suit virtual environments.

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ETS Acquires English Language Learning Test Assets for Japan

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ETS announced this week that it acquired the testing assets of its longtime partner in providing English language learning tests in Japan, the Council on International Educational Exchange.

With the purchase, the nonprofit based in Princeton, N.J., will establish a new subsidiary, ETS Japan, to take over the operations and support services provided in the country.

The move supports the organization’s interest in growing internationally by establishing its own footprint in Japan, said Ralph Taylor-Smith, Managing Director of ETS Strategic Capital, the investment arm of the research and assessment entity. For the last 40 years, ETS tests and other products have been administered in Japan through CIEE.

“We already have business in the country,” Taylor-Smith said in an interview. “But this allows us now to start to expand our global reach, and really gives us a footprint to start to build other areas… Having people on the ground really gives us that local presence and local reach.”

Founded in 1947, ETS is one of the best-known providers of testing in the United States and abroad. Their tests include statewide summative exams, graduate-school entry tests, and tests of English-language proficiency.

With the acquisition, the company will work to provide a complete experience for students, according to an ETS press release, including helping students prepare for the Test of English as a Foreign Language (TOEFL) exams and GRE graduate school entry exam.

Taylor-Smith declined to reveal the total cost of the TOEFL acquisition deal.

This is the latest in a string of purchases and investments for ETS Strategic Capital, which was announced in September 2020 with a portfolio of five companies. The venture capitalist arm of ETS now has a portfolio with closer to 10 companies, Taylor-Smith said.

EdWeek Market Brief previously reported that the investment arm’s M&A deals were expected to range from $20 million to $200 million in size, and its equity investments could run from $1 million to $20 million.

The ETS program’s growth comes as venture capital investment in education surged. Investors put more than $16 billion into ed tech in 2020, according to a report by HolonIQ. That’s roughly double the amount put forward in 2018.

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The Challenge for Companies: Supporting Teachers in a Chaotic Era

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Businesses in the education market face new and unfamiliar obstacles in delivering product support and professional development that spans remote, hybrid, and in-person learning environments.

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Learning Loss During COVID Will Fuel Economic Losses, Business Leaders Predict

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The impact of learning loss during the pandemic won’t just be felt in the classroom. It could also saddle the future economy.

That was the core argument put forward recently by a group of eight business leaders from North Carolina, who made a public plea for state policymakers to address students’ academic slippage during COVID.

Among their recommendations, laid out at a recent online event, were for state policymakers to set up a recurring funding stream to train all of the state’s educators, and to move from a “student tutoring model” for literacy education to a model that supports educators based on the “science of reading.”

Reading proficiency among North Carolina 3rd graders slightly worsened during the pandemic.

According to a report last month by the (Raleigh) News & Observer, accounting for 67.7 percent of 3rd-grade students who had taken midyear assessments, 75.4 percent of 3rd graders were not reading at a proficient level, compared to 73.6 percent last school year.

“Let’s be clear: This is not just a North Carolina problem,” said Kelly King, chairman and CEO of Charlotte, N.C.-based Truist Financial Corp., a consumer and commercial bank holding company. “This is a national problem.”

The impact of learning loss does not appear to be hitting all U.S. school communities equally. A report released by McKinsey & Company in December found that there was a 10 percent drop in average K-5 reading levels among majority-white schools during COVID, but a 23 percent drop in average K-5 reading levels among minority-majority schools.

Another participant in the North Carolina event, Honeywell Chairman and CEO Darius Adamczyk, noted that COVID has likely accelerated the need for higher educational attainment, a demand that is unlikely to abate. Honeywell, headquartered in North Carolina, is a conglomerate with a heavy focus in aerospace and building technologies, among other industries.

Investing in early reading proficiency is integral to weathering a changing economy, and for students to gain education and skills to meet the needs of businesses, Adamczyk said.

“The recommendations we’re making today will address inequities in our workforce and help us develop a strong, diverse, and resilient talent pipeline well into the future,” he said.

In addition to recommending recurring state investments in teacher training in reading, the leaders called for North Carolina policymakers to maintain and even expand funding for pre-K access in the state and to eventually accomplish the goal of enrolling 75 percent of the state’s pre-K-eligible children, and to ensure that every county hits that benchmark.

The state currently funds pre-K programs at about $154 million per year.

Fred Whitfield, president and vice chairman of Hornets Sports & Entertainment, noted that about 9,100 fewer children enrolled in North Carolina pre-K for the 2020-2021 school year compared with the previous school year, eliminating all of the enrollment gains made in the state over the last four years.

Before COVID, enrollment in the state’s pre-K had topped 31,000 children — about 50 percent of the children eligible for the program statewide, he said. Now, pre-K programs in the state are serving only 36 percent of eligible children.

A Big Focus on Pre-K

“The drop in enrollment should not be viewed as a decrease in demand or need for North Carolina pre-K,” Whitfield said. “To the contrary, although we have much to overcome, this proven high-quality program, targeted at some of our most at-risk children, is needed now, more than ever.”

In addition to calling for more support for pre-K, the business leaders are asking state officials to inflation-adjust North Carolina’s pre-K funding for the first time in nine years, to require an annual such inflation adjustment, and to modify county-state cost sharing percentages to help economically disadvantaged counties cover program costs, Whitfield said.

During their presentation, the business leaders cited a 2016 CEO action plan to support improved U.S. literacy rates put forward by Business Roundtable, an association of CEOs at leading U.S. companies.

North Carolina business leaders were inspired by the action plan to initiate several pro-education initiatives, including creation of a comprehensive aligned education system for grades pre-K-3, as well as launching a data methodology to ensure that children stay on track to achieve reading proficiency, said Dale Jenkins, CEO of Raleigh, N.C.-based medical malpractice insurance provider Curi.

A “robust data system” is scheduled to roll out later this year, Jenkins said.

In 2017, the North Carolina General Assembly formed the Birth through Third Grade, or B-3, Interagency Council, which is a joint council between the North Carolina Department of Health and Human Services and the North Carolina Department of Public Instruction.

The goal of the effort was to create a vision for a birth through 3rd-grade system of early education, and a system of accountability tied to it, including standards and assessment, data-driven improvement and outcomes, and teacher and administrator preparation and effectiveness.

“We’ve made progress on these goals through the B-3 Interagency Council that was created in 2017 to address these issues among others,” Jenkins said. “We applaud the General Assembly and the governor for moving this forward together.”

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