Brazil’s state universities enjoy a sterling reputation. But students who qualify for admission come largely from exclusive and expensive private schools. Pupils who attend public schools usually don’t move very far up from their crumbling and often violent neighborhoods.
Former President Luiz Inácio “Lula” da Silva and his successor, Dilma Rousseff—who was impeached last year—attempted to solve the problem by plowing what the federal audit court estimates at 43.2 billion reais ($14 billion) into a student loan program called Fies from 2009 to 2015. The loans supported students turned away from state universities who could use the funds to attend a network of for-profit colleges. Those institutions now educate about 6 million—76 percent of all college students in Brazil.
The for-profit universities are dominated by Kroton Educacional SA, the world’s largest education company, with about 1 million undergraduates. Kroton and its rivals have thrived by expanding their client base through distance-learning classes, where students at centers from the Amazon jungle to beach towns gather weekly to attend lectures.
The gains in enrollment, fourfold over the past 20 years, have been cheered by ordinary Brazilians as a major advance for the middle class in Latin America’s biggest economy. But the subsidies raised the government’s higher education budget by 30 billion reais over six years. In the same period, kindergarten-to-high school spending rose just a third of that. “We’ve got our priorities all backwards,” says José Mendonça Filho, who became education minister after Rousseff’s impeachment last May. In 2015, Brazil spent 27 percent more as a share of gross domestic product on basic K-12 education than its peers in the Organization for Economic…