The Billion-Dollar SAT Industry is Facing an Existential Crisis

After years of buildup, will the pandemic finally put an end to Big Test?

Last Monday, the University of Maryland announced that it would extend its test-optional application policy to the spring and fall admissions periods of 2022 and 2023, allowing students to choose whether to submit SAT or ACT scores. It was just the latest nail in the coffin of the college-entrance-exam establishment: the College Board and American College Testing, which administer the tests, and the test-prep ecosystem that has evolved around them.

Like many other schools, Maryland first implemented the test-optional policy last year, for students applying to enter school in fall 2020. But calls for un-testing have been growing for years, and schools had been steadily dropping testing requirements well before Covid hit the U.S. last spring. According to FairTest, an organization focused on addressing issues related to fairness and accuracy in student test-taking and scoring, 1,050 schools had already implemented test-optional policies by September 2019.

But the pandemic caused a seismic shift. With test sites—often, schools—shuttered, students who had spent months preparing to take the SATs and ACTs last year found themselves shut out. According to numbers released by the College Board, the billion-dollar nonprofit that administers the SATs, 183,000 students (more than half) who registered to take the SAT last September were unable to do so; in October, 154,000 students were shut out of test sites. (Iowa City-based American College Testing hasn’t released ACT testing numbers.)

The College Board, which administers the SAT, the PSAT, and the increasingly popular AP tests generates a reported $1 billion-plus in annual revenue and $100 million in untaxed surplus.

Given the inability of students to access testing, more than 660 additional four-year schools, including every Ivy League school, announced new ACT/SAT-optional or test-blind (meaning they won’t consider scores at all) policies since mid-March 2020, according to FairTest. More than 1,695 bachelor-degree granting colleges and universities (73%) are test-optional or test-blind for fall 2021 applicants, per FairTest’s data. A new report from Common App, which processes applications from over 1 million students a year, shows that through February 15, only 44% of applicants using the Common Application had submitted SAT or ACT scores. Last year, 77% did.

For many in the education community — and students who don’t “test well” — this change is cause for celebration. The case against standardized tests is multifaceted. Critics contend that college admissions offices have become over-reliant on scores for sorting applicants and that the scores are not a good reflection of academic potential for many students. Further, standardized entrance exams help preserve systemic inequities that colleges and universities have been trying to address for decades.

To put it bluntly, admissions tests favor wealthy, white test-takers. “If you test and prep repeatedly, there’s no question that your scores will improve,” says Penny Klein, principal of Sugar Maple College Consulting in Essex Junction, Vermont. But at about $50 for each round of testing, plus potentially thousands for test prep services, that’s not an option everyone can afford.

What’s more, bias embedded in the tests themselves seems to punish nonwhite test takers. College Board’s data show that Black and Brown students score lower on both the SAT and AP exams than white students do. On the 2019 SAT, 57% of white students met benchmarks for the reading and writing and math portions of the test, while Black students met 20% of both benchmarks, and Latinx students met 29%. In 2019, 45% of white test-takers scored 1200 or higher (on a 1600 scale), compared to 12% of Latinx test-takers and just 9% of Black test-takers who did so.

Now, there are numerous indicators that test-optional could be the new normal. In March 2020, Oregon’s public universities announced that, starting with fall term 2021, they would no longer require SAT or ACT scores at all. In May 2020, the University of California Board of Regents unanimously voted to go test-optional for fall 2021 and fall 2022, to be test-blind for the following two years, and to eliminate SAT/ACT testing requirements for California students completely by 2025. The UC system, with an enrollment of 285,000 students in 2019, also said it would work to identify or develop an alternate test “that better aligns with the content the University expects students to have mastered for college readiness.” Other competitive schools that have extended test-optional policies for two or three years, or more, include Amherst, Penn State, Middlebury, Bucknell, Haverford, Reed, Tufts, Davidson, and the College of William and Mary. All told, according to FairTest, 1,370-plus four-year schools have announced that they won’t require SAT/ACT scores from fall 2022 applicants (current high school juniors).

“For the past decade, the path has been that once schools go test-optional, they don’t go back to requiring exams,” says Stephen Friedfeld, a former assistant dean of undergraduate admissions at Cornell and associate dean of graduate admissions at Princeton, and the co-founder/COO of AcceptU, a virtual college advising service whose counselors work with about 400 high school seniors each year. “Obviously, Covid has been a unique and special circumstance, but historically the universities that have gone test-optional realized they didn’t implode. And when universities take the lead in making these announcements, peer institutions often follow suit.”

On March 3, the National Association for College Admission Counseling (NACAC) announced the formation of a commission to “develop specific proposals for reimagining financial aid and college admission systems and ultimately eliminating racial inequity in postsecondary educational access.” The organization has already indicated that reforming the use of standardized tests is a priority.

The biggest loser in all of this stands to be the College Board, which administers the SAT, the PSAT, and the increasingly popular AP tests, and according to a September 2020 investigation by Forbes generates $1 billion-plus in annual revenue and $100 million in untaxed surplus. Its CEO, David Coleman, earns total compensation of some $2 million a year. Test-taking numbers published by Inside Higher Ed and others indicate that annual SAT volume was down 800,000 last year (at $52 per test, plus additional charges to report scores to more than four schools while the ACT basic test has a base price of $55). In January, the College Board also announced it would drop its unpopular SAT subject tests and optional essay test.

An increased push for AP testing in high schools could help offset these losses, but unequal access to AP classes also remains a concern. The College Board has also vowed to create “a more flexible SAT — a streamlined, digitally delivered test that meets the evolving needs of students and higher education,” without giving further details or a timeline.

The big winner of the test-optional movement could be student diversity.

The test-prep industry, which includes giants Princeton Review and Kaplan as well as countless boutique firms, are is next in line for the fallout. Kaplan, a subsidiary of Delaware corporation Graham Holding Company with revenue of over $1.5 billion in 2018, has already been diversifying into professional education and language training in the U.S. and abroad. But its test prep programs saw revenue decline 16% in 2020, along with the fourth quarter of 2020. Like the test makers, the test prep companies could offset losses in SAT and ACT classes by shifting to AP exam prep, for example.

The big winner of the test-optional movement could be student diversity. “Without a doubt, eliminating tests does remove a barrier that has kept some people out,” says AcceptU’s Friedfeld. “If you want first-generation students and underrepresented groups, this barrier — which can include cost as well as distance to testing sites — is huge.” The Los Angeles Times reported in January that the University of California’s systemwide had a 16% increase in applications this year, with 48% more Black applicants at both Berkeley and UCLA; Latinx applicants increased 33% at UCLA and 36% at Berkeley. The University of Maryland hit a record number of 50,000 applicants this year, including a record number of Black and Latinx applicants. And just-released data from Common App, reported in Inside Higher Ed shows that through March 1, applications to more-selective private universities (with admit rates below 50%) were up substantially among first-generation applicants (+20%), fee-waiver recipients (+22%), and applicants from traditionally underrepresented groups (24%). (Applications from these applicants to similar-sized, but less selective schools stayed mostly level.)

The obvious question is, will a majority of students applying to college still be taking SAT or ACT tests at all four or five years from now? Or can kids and parents cross one thing off the list of things they need to worry about — and pay for? “We’ll definitely see a decline in numbers,” says Friedfeld. “But they won’t go away. Although the UC system, for example, is looking to replace them with their own version of a standardized exam, that’s not really eliminating a barrier. People who can will learn how to ace that exam and will be advantaged.” Klein agrees that it will be a challenge for schools “to figure out how to be as holistic and objective as they can be in assessing if a student is really ready,” but says “I would be surprised and maybe a little disappointed if most people are still taking them in four years.”

In the meantime, the advisors recommend that families navigating test-optional applications hedge their bets. “I continue to encourage people to test and study however they can,” says Klein. “For some people, test-taking is a superpower.” For them, it can be worth investing money in prep and retesting to improve an already pretty good score. Says Friedfeld: “Test-optional doesn’t mean you shouldn’t study for and take exams. It just means when you see the score, you might not submit it. If it can help you get in, or get merit aid, you can use it. You can’t deny a 1590 on SATs.” Continuing to have a yes option for tests will continue to benefit these rare geniuses.

On the other hand, Friedfeld and other advisors say they have seen no evidence of students being negatively impacted. “When students see friends getting into good schools without submitting test scores,” he says, “that worry should start to go away.” Applying to school is already stressful enough.

I write about business, science, and things that people do for fun. Work published in Fast Company, Inc., Men’s Journal, Proto, Marker. Vermonter by choice.

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