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

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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Ed-Tech Usage Soared During COVID. Now Districts Are Scrutinizing Those Tools

ed tech usage soared during covid now districts are scrutinizing those tools
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After their ed-tech usage soared during the first year of the pandemic, some districts are now looking to “constructively reduce” the number of tools and platforms in play. That has implications for companies.

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State Budgets Poised to Bring More Money for K-12 in Coming Year

state budgets poised to bring more money for k 12 in coming year
MB MarketplaceK12 081921 No Dramatic Budget Cuts 1298882308

State budgets will not see the deep cuts that many feared at the height of the pandemic and are expected to funnel more money into school districts over the coming year, according to a new analysis.

New data from the National Association of State Budget Officers shows signs of improvement across state spending plans. While they generally haven’t rebounded to pre-pandemic projections, general fund spending is on track to increase by 3 percent this year, the data reveals. And governors in 39 states proposed increasing state spending in fiscal year 2022, which covers the coming academic year.

That’s good news for public schools, which rely heavily on state funding sources. NASBO figures project K-12 spending to increase nationally by $23.9 billion in fiscal 2022 — a counterbalance to the $7.4 billion cut in spending schools faced this year. 

And that doesn’t include the federal money directed to schools through the American Rescue Plan, the sweeping measure signed into law by President Biden in March, which channeled $122 million into K-12.

It’s a very different reality than the one school districts and governors were bracing for around this time last year, when revenues in 45 states fell and experts warned it could take years to dig out of coronavirus budget holes.

“Last spring, when the pandemic first hit and the economy was spiraling down, there was definitely a fear that the cuts would be a lot worse than we saw,” said Kathryn White, director of budget process studies for NASBO. “Generally, the outlook has been improving since those spring forecasts.”

Tax Bases Bounced Back

There are multiple reasons the more dire predictions didn’t come to pass, White said. For one, the federal stimulus money pumped into the economy ultimately boosted state coffers.

States also didn’t see severe drops in income taxes as many higher-income workers were less impacted by COVID-19 than expected, because many transitioned to working from home. And she said online shopping helped mitigate losses in sales tax revenue.

Overall, 38 states had their general fund collections for fiscal year 2021 come in higher than expected. That’s a completely flipped story from 2020, when 35 states had revenues fall short of their budget. 

States were also able to lean on their reserves. Prior to COVID-19, states’ rainy day funds were at an all-time high after a decade of rebuilding following the Great Recession, NASBO found. Balances were as high as 14 percent of states’ spending. After 2020, balances dropped 12.8 percent, and they’re expected to fall again in 2022. 

While the national picture is rosy, White said it’s important to note that some states were hit harder than others. 

For example, states with an especially strong tourism industry or a higher unemployment rate saw larger negative impacts on their budgets, according to the NASBO analysis. Those states were more likely to make budget cuts this year, and they’re planning more modest budgets for 2022.

That means the impact on K-12 spending will vary by state. And schools also will continue to cover additional costs caused by the pandemic, including extra safety precautions or increased support to address student academic stagnation during the pandemic. 

States will have to be careful with how they allocate one-time federal money and budget for the next few years to ensure long term stability, White said. 

“There’s just a lot of uncertainty about what the post-COVID economy will look like, how it will affect states,” White said. “And, of course, the Delta variant in the U.S. has tempered some activity in places, so that adds another layer of uncertainty.”

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

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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New Institute Backed by National Science Foundation to Explore AI’s Role in Education

new institute backed by national science foundation to explore ais role in education
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A ed-tech nonprofit will join four universities in launching a new institute dedicated to creating artificial intelligence tools that can be applied to human learning and education.

The effort is meant to encourage the development of products for use in K-12, influence future AI products made for K-12, and is intended to improve upon past AI technologies that were difficult for teachers to use, said Jeremy Roschelle, executive director of learning sciences research for Digital Promise, the education nonprofit involved in the initiative.

“There’s an emphasis here on what people are calling classroom orchestration – how to help teachers organize for longer-term, more complex, collaborative, problem-solving things,” Roschelle said. “I think the classroom orchestration part, in particular, could be part of a big change in what products people emphasize in the market, and how they support teachers.”

A 5-year, $20 million grant from the National Science Foundation will support the AI Institute for Engaged Learning, Digital Promise said. Analysts, policymakers, and product developers from Digital Promise will join researchers from North Carolina State University, University of North Carolina, Indiana University, and Vanderbilt University, for the initiative.

The work of the institute will have three main goals:

  1. Created platforms will incorporate story-based problem scenarios fostering communication, teamwork, and creativity.
  2. Platforms will generate AI characters capable of communicating with students through speech, facial expression, gesture, gaze, and posture.
  3. The institute will build a framework that will customize educational scenarios and processes to help students learn, based on information collected from conversations, gaze, facial expressions, gestures, and postures of students as they interact with one another, teachers, and the technology itself.

Schools, museums, and outside nonprofits will work with the institute to ensure created tools are ethically designed and advance diversity, equity and inclusion, according to the announcement.

District officials, and advocates for the ethical use of technology, have raised repeated concerns about potential pitfalls in applying AI-powered technology in schools. One fear is that because AI systems are dependent on collecting large amounts of data and using algorithms to guide policy and classroom practice, they will end up reinforcing racial, gender or other stereotypes.

For example, could an AI-powered curriculum platform, or one that recommends academic interventions for students, end up directing more students of color into remedial coursework, because of biased algorithmic assumptions?  (See Education Week’s recent special report breaking down concerns about AI’s role in classrooms.)

Data Privacy in Focus

A November report by the Center for Integrative Research in Computing and Learning Sciences cites several concerns and considerations come into play when it comes to how AI technologies safeguard student privacy.

How will AI-recorded student conversations and emotional data be used? How long will information be saved? Will it be part of a student’s record? These are all questions that come into play when AI and children interact, the report notes.

AI detection of emotions, through facial expressions, is well-developed, though challenging from a privacy and ethical standpoint, and appropriate policies must still be determined to address these challenges, the report says.

“A very strong focus of this institute … is coming together to really think about how do we tackle some of these issues of privacy, security?” Roschelle said. “None of this is going to fly if people are terrified.”

If AI can be applied creatively and responsibly, it has the power to enrich lessons across subjects, Roschelle said.

He offered an example detailing how forthcoming AI tools might generate story-based situations that promote collaboration and creativity.

Imagine a science class planning a trip to Mars over a three-week period, he said. For the purposes of that trip, they would need to measure gravity, the strength of the Sun’s energy, and air moisture. They would have to plot out measurement devices that they need, the composition of student teams to observe measurements, and what vehicles to bring.

In this case, an effective AI system could “help them along the way whenever they get stuck,” Roschelle said, and “tune the story to the choices they make.”

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Pace of Mergers and Acquisitions in Education Market Jumps, New Analysis Finds

pace of mergers and acquisitions in education market jumps new analysis finds
HP market trends stockmarket Mar17 GettyImages 1205003813

The total value of mergers and acquisitions in the education industry grew by more than 50 percent from the second half of 2020 to the first half of this year, as companies across the market rushed to add to their portfolios, according to a report by investment banking firm Berkery Noyes.

The overall number of individual M&A transactions also rebounded to pre-pandemic levels.

Education companies closed 240 acquisitions in the first six months of 2021, up from 222 deals in the second half of 2020, and 210 mergers in the first half of last year. There were 238 acquisitions in the education industry in the second half of 2019.M&AGraph

The total value of education acquisitions from January through June was $19.4 billion, largely driven by Platinum Equity’s $6.4-billion acquisition of McGraw Hill, the report noted.

Deals made during this period had nearly as much value as mergers and acquisitions for the full year of 2020, when they totaled $21.4 billion.

The investment group, which provides advice and financial consulting to middle-market companies in the technology and information sectors, tracked 1,152 education deals between 2019 and June 2021.

Private equity financed 40 percent of acquisitions during the first half of this year, 8 percent higher than the 2019-2021 overall average.

According to Berkery Noyes, 97 of the 240 deals during this time frame were financed by private equity, venture capital, or some other investment firm, the most in at least three years and a 131 percent increase over the first half of 2020.

Twelve deals in the first half of this year carried values of more than $100 million, and at least seven of those involved the K-12 sector. About one-third of the total transactions had values between $4.5 million and $54.6 million.

K-12 media and tech surpassed professional training services as the education industry’s most active market segment year-to-date.

There were about 50 acquisitions that involved professional training services and roughly 40 deals that involved K-12 media and tech in the second half of last year, while nearly 60 deals touched K-12 media and tech and about 45 deals covered professional training services in the first half of 2021.

The report showed a mixed picture for market activity in various segments for the first six months of this year compared with the second half of 2020.

The rate of deals in the childcare services and higher-ed media and tech spaces increased during this span, but the number of deals in professional training technology, higher-ed institutions, and K-20 services fell. Deals involving K-12 institutions remained stable.

In addition to the McGraw Hill acquisition, notable K-12 deals in the first half of 2021 included a Byju’s purchase of Indian tutoring provider Aakash Educational Services for $900 million, Renaissance’s $650 million acquisition of Nearpod, and Kahoot’s $435 billion addition of K-12 single-sign-on provider Clever.

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Congressional Bill Aims to Incentivize Education Companies, Schools to Sharpen Cybersecurity

congressional bill aims to incentivize education companies schools to sharpen cybersecurity
MB Analysts Cybersecurity Connect 06162021 GettyImages 1271619512

A bill recently introduced in the House would help define best cybersecurity practices for K-12 vendors and outline new spending that could benefit certain education companies focused on online safety.

The Enhancing K-12 Cybersecurity Act, introduced June 17 by Rep. Doris Matsui, D-Calif., would task the Department of Homeland Security with establishing a program to circulate K-12 cybersecurity best practices, training, and lessons learned, and with recommending online safety tools for purchase by state education agencies and school districts.

The bill calls on DHS to consult with school IT vendors and cybersecurity companies in putting together the list of best practices.

Doug Levin, the national director for the K12 Security Information Exchange is lobbying for the Matsui bill, expects significant regulatory action at the federal and state levels around K-12 cybersecurity, though it’s difficult to say exactly when that will happen. The K-12 Security Information Exchange operates the K-12 Cybersecurity Resource Center, an online database that tracks K-12 cybersecurity incidents.

The House bill could face a steep climb to become law, as the House Education and Labor Committee currently has no plans to consider the measure, and companion legislation has yet to be introduced in the Senate.

Lawmakers failed to vote on a similar bill introduced in 2020, before the previous congressional term ended in December.

Schools are relying more on technology for remote learning, and policymakers are seeing the need to start imposing baseline internet safety expectations for school districts and vendors, he said.

With cybersecurity policies likely to tighten, school districts and government agencies will increasingly look toward education companies that have already crafted and adhere to a set of best practices for cybersecurity, Levin said.

If passed, the federal bill charts the creation of a DHS-run database that would recommend security tools and services for schools to purchase, and allow schools and states to find and apply for funding opportunities to improve cybersecurity.

H.R. 4005 doesn’t spell out how the money would be dispersed, so the federal government would likely issue further guidance on expenses that might qualify for any cybersecurity grants issued, if the legislation is enacted, Levin said.

In addition to defining best practices and outlining new channels for K-12 cybersecurity funding, the legislation proposes the development of a voluntary registry of K-12 cyberattack incidents, and would require yearly DHS reports analyzing cyber incidents across all levels of K-12.

Information to be collected into the registry may include descriptions of the incidents’ size, and whether each incident was the result of a breach, malware, distributed denial of service attack, or other method designed to cause a vulnerability.

“The bill certainly is responsive to the needs that members of Congress have been hearing from the field,” Levin said. “School districts are feeling under assault from ransomware.”

Levin has compiled data showing that many cyberattacks have targeted teacher and student data stored by education companies, not just within schools.

According to the K12 Cybersecurity Resource Center’s most recent annual report on the state of K-12 cybersecurity, at least 75 percent of all data breach incidents affecting public K-12 school districts resulted from occurrences involving school vendors and other partners.

The Federal Trade Commission has ratcheted up its focus on data breaches in K-12 recently, signaling a stricter enforcement posture toward companies that collect data on K-12 students and teachers.

Organizations endorsing the Enhancing K-12 Cybersecurity Act include the National Association of Secondary School Principals, the National Association of Elementary School Principals, the Council of Chief State School Officers, the National Association of State Chief Information Officers, the State Educational Technology Directors Association, and the Consortium for School Networking.

“As cyber criminals grow more sophisticated and aggressive, we must provide the resources and information necessary to protect our schools,” Matsui said in a statement. “The Enhancing K-12 Cybersecurity Act provides a roadmap and prepares our cyberinfrastructure for the threats of tomorrow.”

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

inside one education companys 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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Connect Students Online, Boost Your Country’s Gross Domestic Product?

connect students online boost your countrys gross domestic product
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Expanding and improving internet connectivity for schools can have a positive impact reaching beyond improving students’ access to information.

A new analysis by the Economist Intelligence Unit released earlier this year finds that closing the digital divide in education can boost a country’s economy. Even simply increasing the speed of broadband for school buildings can lead to gains in a country’s gross domestic product, the authors of the report contend.

The researchers say that a quality internet connection, when used well, leads to improved academic results, which then produce higher salaries that support a healthier economy.

A 10 percent increase in school connectivity can increase the effective years of schooling for children by 0.6 percent, and raise the GDP per capita of a country by 1.1 percent, the analysis found.

“The biggest takeaway is the massive amount of potential that school connectivity has to close gaps that exist not just in education but in communities and beyond,” said Shivangi Jain, an EIU public policy consultant and lead economist.

“It gives children all over the world access to basically the same information… I don’t think any other approach has quite that same potential.”

Having access to the internet provides students a “wealth of resources” and enables new forms of learning, including through adaptive learning platforms, the report says, which plays a role in improving the quality of education students receive globally.

“Improved learning outcomes proliferate through adolescence and adulthood, leading to a wider range of higher education and career opportunities,” the report said. “Ultimately, these benefits to individuals are reflected in terms of higher incomes, better health and improved overall well-being.”

Basic Access Not Enough

However, Jain, one of the report’s authors, said governments and schools need to take steps to ensure the new connectivity is being used to its full potential, including by prioritizing digital learning education policy and overcoming barriers to integration, such as building infrastructure or obtaining devices. Access also needs to be affordable and high quality in terms of speed and reliability, the report said.

In the United States, 99 percent of schools are connected to fiber infrastructure, according to the report. But the quality of connection varies greatly among states and areas. Improving the bandwidth per student at schools nationwide to meet the country’s highest standard would increase the GDP by as much as 5.5 percent, according to the report.

In developing countries, connecting schools to the internet could have a more immediate impact on the wider community by enabling local entrepreneurship, introducing the gig economy, and providing access to online banking and improved emergency communications.

The report was sponsored by UNICEF and comes two years after the organization launched an initiative to connect every school to the internet. Globally, two-thirds of children between the ages of 3 or 17 — 1.3 billion — don’t have access to the internet.

It also comes after the U.S. approved $7 billion in federal aid for improved internet connectivity, spurred in part by the gaps in access that were spotlighted during the pandemic and schools’ abrupt pivot to remote learning. That funding, approved as part of the stimulus measure signed into law by President Biden, focus specifically on increasing students’ access to reliable internet services at home.

“This is the moment to be discussing this,” Jain said. “Children need access to connectivity regardless of where they are, and the pandemic really highlighted that … or at least enables people to see what [connectivity] can offer.”

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

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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