College Board and ACT: Should Big Test remain as gatekeeper of higher education?

Colleges are increasingly making standardized tests optional for applicants, leading to questions about whether or not the companies profiting from broad-based testing should be the de facto gatekeepers of the higher education admissions system.

“The test prep industry has become a multi-billion dollar industry, and it's growing and expanding at a high rate,” Susan Paterno, a professor of English and director of the journalism program at Chapman University and previously served on a college admissions board, told Yahoo Finance. “As more and more kids take these high-stakes tests and enroll in these test prep programs, the competition to get into selective colleges just shoots through the roof, and the competition to win merit scholarships reaches a fever pitch."

The number of spots at quality colleges each year are finite, so the stakes are high: In 2019, authorities announced charges related to an alleged conspiracy that involved parents of aspiring undergraduate students collectively paying more than $25 million to a middleman who secured student-athlete placements at highly selective U.S. universities. The scandal became national news (and a Netflix documentary) as several high profile parents and universities were shown to be involved in the scheme.

“If these are the hoops that middle-class and affluent kids have to jump through, imagine what it's like for kids coming out of underfunded, poorly resourced high schools,” said Paterno, who authored a forthcoming book titled "Game On: Why College Admissions is Rigged." “It's terrible... it requires an entire systemic change.”

Shifts are occurring: More than 1,500 accredited U.S. four-year colleges and universities will not require students applying for fall 2022 admission to submit ACT/SAT scores, according to the educational advocacy organization FairTest, meaning that two-thirds of all bachelor-degree institutions in the country will be test-optional.

“Test-optional and test-blind/score-free policies have become the ‘new normal’ in undergraduate admission,” FairTest Executive Director Bob Schaeffer stated. “Higher education leaders recognize that removing ACT/SAT requirements promotes both academic excellence and equity.”

"The College Board supports colleges introducing more flexibility and choice into the admissions process through test-optional policies," Priscilla Rodriguez, Vice President of College Readiness Assessments at The College Board, told Yahoo Finance in a statement. "Some students may decide their application is stronger without test scores, while others will benefit from sending them, including the many thousands of underrepresented students whose SAT scores strengthen their college applications."

Nevertheless, the college admissions landscape remains competitive, and students still feel pressured to spend time and money on formal test prep and other services.

“There are several multi-billion dollar industries that exist to support the process of applying to college,” Akil Bello, director of advocacy and advancement at FairTest, told Yahoo Finance. These business areas, Bello added, include “the counseling industry, the sports industry, the test prep industry, the extra curricular activity industry.”

This reality also allows Big Test, despite the post-pandemic trends, to continue making millions from standardized testing and Advanced Placement (AP) programs while remaining embedded in the educational fabric of America.

"Four-year colleges use assessment data from ACT and College Board's SAT for many, many purposes, not just admissions," ACT CEO Janet Godwin, who has spent 30 years at the company and recently assumed the CEO role in November 2020, told Yahoo Finance in a recent interview. "So in the spirit of test-optional, even if schools are not going to require scores for admissions, they will still look at scores of students."

The birth of ‘Big Test’

The origins of standardized testing can be traced back nearly 100 years.

In the late 1930s, Henry Chauncey, who later became the founder of the Educational Testing Service (ETS), used the backing of a Harvard University president to create a multiple-choice aptitude test that opened up admissions to “elite” — or “highly rejective” in Bello’s words — schools.

In Chauncey's case, according to "The Big Test" author Nicholas Lemann, his backer wanted to find a way to widen the recruitment net to select students whom they’d offer a then-brand new, fully paid four-year grant that would cover tuition and room and board.

Chauncey worked with another expert, Carl Brigham, who was on the College Board's test development committee, to create a Scholastic Aptitude Test (SAT). The SAT was experimentally administered for the first time in June 1926 and became the main test for the Harvard National Scholarship program. By 1936, Harvard required all candidates who vied for the scholarship to take the SAT.

Chauncey then started promoting the test to other Ivy League colleges to help with recruitment of scholarship students. Over the following decades, the SAT became widely adopted across the country.

“The machinery that... [was] created is today so familiar and all-encompassing that it almost seems like a natural phenomenon, or at least an organism that evolved spontaneously in response to conditions,” Lemann wrote in his book. “It’s not. It’s man-made.”

According to Lemann, Chauncey wanted to “mount a vast scientific project that will categorize, sort, and route the entire population” in the U.S. and largely succeeded.

A couple of decades later, Everett Franklin Lindquist, a professor at the University of Iowa, created the American College Testing (ACT) testing program in 1959 as an alternative to the SAT.

The College Board cash machine

There is a lot of money at play in standardized testing, despite both ACT and College Board being nonprofits.

The ACT is considered a smaller player based on its revenue numbers. In fiscal year 2019 tax filing, the company reported $302 million in total revenue while its now-resigned CEO made $826,000 that year.

The College Board generated $1.1 billion in total revenue in fiscal year 2019 while its CEO, David Coleman, made $1.4 million. (The SAT itself is still administered by ETS, now the world's largest private non-profit educational testing and assessment organization. ETS reported nearly $1.3 billion in total revenue for fiscal year 2019, and its president reported annual earnings of $1.3 million.)

"The salaries of our senior leaders are well within the normal market range for similar roles at similar organizations," a College Board spokesperson said in a statement. "Salaries are set by our Board of Trustees in consultation with independent, external compensation experts. We benchmark salaries against comparable organizations, including educational organizations and other nonprofit institutions."

The College Board also oversees the AP program, which was created in 1952 to enable high-achieving students to earn college credit (and potentially higher GPAs) through special honors classes and standardized exams. Advanced Placement exams generated $490 million in revenue in fiscal year 2018.

Among the class of 2020, 38% of U.S. public high school graduates in the U.S. took at least one AP exam which is up from 27% a decade ago, according to the College Board. 

"The AP is 95% of the marketplace in the United States,” FairTest's Schaeffer told Yahoo Finance. (FairTest has a pending class action lawsuit filed against the College Board over how it administered the 2020 AP exams, seeking $500 million in compensation.)

"The AP is only growing stronger in schools," Paterno said. "And as test optional becomes more the norm, which it certainly will, the ACT will get aced out . … [Then] what's going to determine scholarships and admissions? AP.”

Jon Boeckenstedt, vice provost of enrollment management at Oregon State University who previously sat on College Board committees, told Yahoo Finance that “it’s not healthy for a company like the College Board, which is nominally not-for-profit but clearly doesn’t run like one, to have such an intrusive control of college admissions.”

Boeckenstedt added that he believed these companies want to expand testing all the way down to the elementary level, which is a “completely backwards and absurd system” particularly since the College Board isn’t a federal or a government agency — they’re “just a company offering services to education."

"The College Board is a self-sustaining, not-for-profit organization delivering on our mission to connect students to college success and opportunity," a College Board spokesperson said in a statement. "We are governed by our membership, composed of 6,000 colleges and schools."

'If we could send a couple of lobbyists to a state capital...'

While the K-12 education system is highly variable by state since there is no national curriculum to test, these national testing companies have created individual relationships with each state through lobbying and adaptation to obtain lucrative contracts.

“The ACT was actually first to understand the marketing value of selling product wholesale, rather than retail,” Schaeffer said. “If we could send a couple of lobbyists to a state capital and convince the board of education staff to buy the tests in bulk so that every high school student in the state, you can make a lot more money a lot quicker... than having to sell to individual kids and their parents, signing them up one by one.”

That process was further boosted in 2001 with the passage of the No Child Left Behind Act. The Bush administration’s education reform legislation dramatically increased the role of standardized testing by requiring states to develop or select tests so students would be tested annually in grades 3 through 8.

Schaeffer explained that “ACT and the College Board jumped on that by going to states’ education officials” and flagged that since students were already taking their tests, why not make that the default? “Why don’t you just take our test… as part of your state-required assessment program and reduce the number of tests that kids take?”

In 2012, College Board brought on a CEO in Coleman who knew the landscape quite well: Coleman built the Common Core curriculum standard, which was released in 2010 for states to adopt in an attempt to keep American children up with global competitors.

The lobbying worked particularly well in some states. In Nevada, students need to finish their ACT before they can graduate. As of May 2021, the ACT is still mandatory for high school students who wish to earn a Nevada diploma, a Nevada Department of Education confirmed to Yahoo Finance.

“In most other countries, there's a uniform national curriculum," FairTest’s Bello said. "Therefore, a uniform national testing makes sense." Yet, he added, “the United States praises and prides itself on states’ rights and local control of schools. But in order to apply to college, you have to take a national standardized exam. How does that make sense?”

The Big Test competition is fierce. In 2020, the ACT and the College Board were embroiled in a controversy in West Virginia involving a former state schools superintendent who had allegedly discriminated against ACT’s attempts to “win the statewide standardized testing contracts.”

At the same time, regulation is largely nonexistent: There is no one entity has full oversight over the patchwork of agreements that local and state entities sign with education services companies. And since K-12 education has been generally controlled on a local level, “how would the Department of Education regulate a state?” Paterno asked.

"There is no accountability at the College Board,” Boeckenstedt said. “I like to say that the hot dog vendor in Manhattan operating on the street outside the College Board office is accountable to more government agencies than the College Board is."

'We consider these tests to be biased and discriminatory'

Amid the pandemic, some states pushed back against ubiquitous standardized testing.

Colorado lawmakers passed legislation to make tests optional for incoming freshmen and later introduced legislation to make that move permanent.

“We did the one-year pause because of the pandemic and because of the difficulty kids had in accessing these tests,” Representative Cathy Kipp (D-CO), who previously worked for a local board of education, told Yahoo Finance. “We got so much positive feedback from our colleges and universities on this idea, that I knew I wanted to run a bill this year to make this change permanent.”

In May, the state’s governor signed the bill to make sure ACT or SAT scores are no longer required as part of admissions into Colorado’s public higher education institutions.

Kipp explained that admissions counselors have told her that “these tests are unfortunately a better indication of a student's zip code (their socioeconomic background) than anything else, we consider these tests to be biased and discriminatory.”

She added that data from the one-year pause revealed that the applicant pool was “much more diverse this year from students who may not have applied before because of a perceived need to have a certain test score.”

In New York, lawmakers introduced a bill that aimed to stop “certain public institutions of higher education from using the scholastic aptitude test and ACT assessment in the admissions process on and after the [2024-2025] academic year for New York resident applicants and requires SUNY and CUNY to create a new standardized test by the [2026-2027] academic year.”

The University of California in May last year voted to phase out the SAT and ACT as requirements for admission into its schools.

Ultimately, there “will continue to be some colleges that do not require testing at all, some that allow students to make the choice, and some that still require testing,” Bello said, adding that he also believed the “number that require testing will go down in the future."

The test-optional movement is “the best thing to come out of the pandemic,” Boeckenstedt said. “Anyone who has studied the history of testing knows how problematic it is, and how — despite the claims of the testing agencies — tests are coachable for those with resources and tests disadvantage those who are already disadvantaged in the admissions process.”

Boeckenstedt noted that testing can be a useful sorting tool — but often not in the ideal way.

“A high score on a standardized test suggests you have some skill: The ability to pick out the ‘right’ answer from those offered," Boeckenstedt explained. "All things being equal, that’s a skill you’d rather have than not, but it doesn’t mean you are a good student, because being a good student involves time and process. Imagine an English literature or philosophy class where the goal is just to get the ‘right’ answer on an exam: The very idea is absurd.”

'A multi-billion dollar industry around administering and preparing for these tests'

If the role of standardized testing diminishes, a question arises: What's the alternative?

Test-optional could also lead to greater reliance on essays, for instance, though the benefit of such a system is also up for debate.

According to one paper, which looked at 240,000 admissions essays submitted by 60,000 applicants to the University of California in November 2016, “essays have a stronger correlation to reported household income than SAT scores.” In other words, more affluent students may have an even bigger upper hand in the admissions process if essays were prioritized over standardized testing.

“The SAT and ACT have a very strong, predictive power for college graduation and college graduation,” Preston Cooper, a research fellow at the Foundation for Research on Equal Opportunity, told Yahoo Finance. “This is the biggest source of risk for the student, the biggest determinant: whether they're going to be successful in college … [and] whether they actually finish.”

In a recent op-ed, Cooper argued that the SAT "is among the most useful components of a student’s college application because students who earn a high SAT score are extremely likely to finish college in a reasonable amount of time."

Michael Petrilli, president of the Thomas B. Fordham Institute, a conservative education think tank, further argued that standardized testing in the form of ACT, SAT, and the AP could actually help level the playing field across income classes of aspiring college students.

By mandating tests for across the board, Petrilli told Yahoo Finance, “you would then make sure that some kids weren't slipping through the cracks, who might be very well prepared for college but didn't know that they didn't see themselves as college material or they were first-generation kids."

These students could be “high-achieving kids that could've gotten scholarships that could have gotten admission to some elite universities, but they were never taking the college admissions tests because they just didn't know how to do it, or they nobody was encouraging them to, and so they were lost,” Petrilli added. “But if you have everybody take the test, especially during the school day and even better, if the state pays for it, then you might end up catching some of these kids.”

Another option is to simply create a better test: The University of California will attempt to identify or create “a new test that better aligns with the content the University expects students to have mastered for college readiness” by 2025.

In any case, according to Bello, the dominance of Big Test raises the question of whether the multi-billion college prep industry is worth the cost to students and schools across the country.

“The value of the test industry, as in the test prep industry, to the college process: it’s fairly minimal,” Bello said. “It actually hurts the college process. Testing predicts above GPA maybe five, six percentage points of first-year GPA. … So to create a multi-billion-dollar industry around administering and preparing for these tests seems like fairly minimal return on investment for the country.”

This post has been updated with statements from College Board.

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Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

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