A recent study has examined the growing influence of private equity in the U.S. childcare industry, contributing important insights to an ongoing debate about corporate ownership in early education. While private equity involvement in sectors like nursing and hospice care has been linked to declines in service quality and increased costs, research on its role in childcare has been limited despite significant industry expansion.

Nearly all major U.S. childcare chains, including the two largest—KinderCare and Learning Care—have either current or past associations with private equity firms. Researchers Jessica Brown of the University of South Carolina and Chris Herbst of Arizona State University analyzed national business registry data in the study titled “Big Daycare: The Growth of Private Equity in the U.S. Child Care Market,” released in 2024.

Their findings indicate that private equity-backed providers tend to operate in higher-income areas where families are better able to pay tuition, and in states with fewer regulatory requirements—such as higher allowable child-to-teacher ratios and lower educational qualifications for teachers—which can reduce labor costs. Tuition rates at private equity-owned centers are generally higher compared to independently owned centers, though similar to other large chains regardless of ownership type.

Brown noted that large childcare chains exhibit comparable outcomes regardless of private equity involvement. She suggested that more meaningful comparisons might explore differences between for-profit and nonprofit providers, such as the YMCA, a topic she hopes to investigate in future research. Though the study does not definitively conclude whether private equity’s role is beneficial or harmful, it highlights that profitability may help companies survive in a low-margin industry heavily burdened by operational costs.

Private equity firms typically invest large sums of institutional and individual capital and use leveraged buyouts to acquire companies, aiming to maximize returns for investors. Critics argue this profit-driven model conflicts with childcare’s social mission, raising concerns about quality, staffing, and access, especially given the sector’s reliance on substantial public funding.

Federal and state lawmakers have introduced regulatory measures and investigations focusing on private equity-owned childcare centers, many of which receive significant taxpayer subsidies through state and federal assistance programs designed to help low-income families. For instance, Learning Care reportedly derived approximately one-third of its revenue from government childcare subsidies in fiscal year 2022, amounting to $150 million to $170 million. KinderCare received an estimated $457 million in subsidies during the first half of 2024, according to a letter from Senator Jeff Merkley (D-Oregon).

While some private equity-backed companies argue their scale and resources enable investments in improving educator compensation, curriculum, and facilities, the study found mixed evidence regarding quality. Private equity centers often reported higher accreditation rates and state-quality ratings compared to non-private equity centers. However, indicators such as elevated teacher and child turnover rates in a subset of states may suggest challenges with workforce stability, which is linked to poorer child outcomes.

Industry proponents emphasize that parents prioritize quality over ownership structure. Kathy Ligon, who advises early education providers, remarked that larger companies can provide necessary resources for quality care and that concerns about profit motives undermining service are not universally observed.

Transparency remains a key issue, as the private nature of most private equity firms obscures profit margins and financial practices. Some experts advocate for stronger public oversight and restrictions on how publicly funded subsidies are utilized, urging that taxpayer dollars support educator wages, quality improvements, and expanded access rather than investor dividends.

Massachusetts recently enacted legislation limiting public funding for large for-profit childcare companies and imposing new transparency requirements, signaling growing governmental scrutiny.

The debate over private equity’s place in childcare continues as stakeholders seek to balance business sustainability, quality of care, and equitable access. Researchers emphasize that parents should not be alarmed but encouraged to evaluate childcare quality based on observable markers such as staff consistency and educator-child interactions while policy and research evolve to address outstanding questions.