Kids' test scores began declining way before COVID. These schools are making gains

Stanford/Harvard's latest Education Scorecard says U.S. student test scores were declining for 4-6 years before COVID, with math now improving in most states and reading gains showing up only where science-of-reading reforms were adopted. Washington, D.C. led math improvement, while only Louisiana has returned to 2019 performance in both math and reading; no state is back to 2013 levels. The report also links a U-shaped recovery to federal relief aid, with the highest-poverty districts benefiting most from pandemic funds.

Analysis

The marketable implication is not “education is improving,” but that a multi-year policy reset is creating a bifurcated demand curve for edtech, tutoring, diagnostic assessment, and literacy intervention vendors. The biggest second-order winner is likely the segment selling high-frequency, evidence-based remediation into high-poverty districts, where federal funding and district urgency created an unusually clean reimbursement backdrop; that spend is more durable than generic K-12 software because it is tied to measurable test-score recovery rather than discretionary tech refresh cycles.

Reading is a slower-moving catalyst than math and is more policy-dependent, which matters for underwriting: states adopting explicit literacy mandates are effectively creating a procurement wave for phonics curricula, teacher training, screening tools, and adaptive practice products over the next 12–24 months. The competitive dynamic should favor companies with implementation capability and district-level sales force depth, not just content quality, because districts are now buying outcomes and compliance, not “innovation.” This also suggests margin expansion for vendors that can bundle professional development with software, while pure-play content sellers may see slower conversion.

The contrarian risk is that the rebound narrative gets over-discounted before it is monetized. Federal relief spend is fading, and if district budgets normalize faster than test-score recovery, there is a gap where adoption looks strong in policy terms but weak in revenue terms. A second risk is that math can recover faster than reading, causing capital to crowd into the wrong subvertical; reading-focused beneficiaries may look early, but the payoff window is longer and more fragile because classroom practice change is stickier than software deployment.

Key Decisions for Investors

• Long CHGG or private-market tutoring/assessment analogs only as a tactical trade into district budget season; best entry is on pullbacks after any broad edtech rally, with a 6-12 month horizon and stop if guidance shows federal-relief normalization accelerating.
• Long LEA / long literacy-and-assessment vendors vs. short broader K-12 platform exposure (e.g., pair against a generic edtech basket) for a 3-6 month window; thesis is that mandated literacy reforms drive higher-conviction purchases than discretionary software seats.
• Build a small basket long PXW-like educational services and school-ops beneficiaries tied to remediation spend; target districts with high poverty and documented reading reform adoption, where the probability of contract renewal is highest.
• Avoid chasing names that are pure exposure to general K-12 enrollment growth; the trade here is remediation intensity, not headcount, and the latter may disappoint if demographics flatten.
• Consider a call spread on an edtech/assessment leader ahead of state literacy-law implementation cycles (6-18 months), funded by selling upside in slower-growing classroom hardware names that are unlikely to benefit from the policy shift.