Municipal schools and newly opened free schools were allowed to compete against one another to attract students, although one difference in the conditions remained.
Municipalities were only required to pay 85 percent of the school capitation allowance for students who chose free schools, and the free schools still retained the right to charge students fees to cover their expenses.
Many new free schools, with new operating methods, ambitions and attitudes, started to compete with the municipal schools for money and capitation allowances. More free schools also emerged on the scene when the social democratic government expanded the free school reform in 1996. Free schools were now given the same terms and conditions as municipal schools and could be allotted 100 percent of the capitation allowance for every student that chose to attend them. In return, free schools were not allowed to charge fees and did not have the right to selectively choose the students who would go there. Peje decided to start the school he did not have as a child – a school based on the idea that all people are different. The new school company was launched in January 1999, and named Kunskapsskolan.
“Kunskap” means learning or knowledge in Swedish.