China’s Education Crackdown Pushes Costly Tutors Underground

China’s latest campaign to rein in its $100 billion out-of-school education sector was meant to level the playing field for all, instead the crackdown is forcing tutors under the radar, making their services even more expensive and exclusive.

A sweeping overhaul announced last month bans private companies from teaching the school syllabus during weekends and vacations and from making a profit, along with a list of other restrictions.

The education technology industry is most affected with more than $18 billion wiped off the combined market value of TAL Education Group, Gaotu Techedu Inc. and New Oriental Education & Technology Group Inc.

The new rules have also seemingly created a loophole though temporarily: private tutors and one-on-one lessons that the wealthiest families were already using to give their kids a headstart.

With the companies that provided group classes to middle-class families now decimated, regulations intended to redress the balance for students could end up skewing it further, as extra assistance becomes available only to the richest.

Private tutor rates have already skyrocketed in the aftermath of the chaotic crackdown.

In Shanghai, parents say some one-on-one tutors are charging as much as 3,000 yuan ($463) an hour.

Private tutors — many of whom are public school teachers offering extra tuition to students one-on-one, or in small groups — have been a popular option for rich families since well before the crackdown.

Though the rules announced on July 24 specifically target education firms, there are signs now that individuals are also starting to face additional scrutiny.

Following a recent inspection by the Beijing Municipal Education Commission, one person, along with six institutions, have been punished for offering unlicensed lessons.