The ACT, long an independent proposition, has recently announced a partnership, which is to say a buyout, by Nexus Capital Management LP. Of course, they promise nothing will change, but businesses don’t grow and succeed by remaining stagnant. The equity firm has made a major investment with this purchase, and you can expect them to want to gain something from it.
So what does this mean for the future of standardized testing, and for any high school students out there planning on taking the ACT, now or in the future? In this article, we’ll look at the possible ramifications of this purchase, and how they might impact you. Let’s get started!
So What’s Happening Exactly?
Currently, the previously non-profit ACT has been purchased by a private equity firm. The firm is merging the ACT with a previously held testing property, Encoura, under the ACT’s name and brand. They have announced no changes to the ACT, and have promised that the testing model will not change.
Whether these promises will be kept remains to be seen, but for the moment at least, we do not expect to see any sudden shifts in the testing landscape because of this. While change can and will come, it will not arrive suddenly or unannounced. Expect to see a significant lead time before any major changes to how the ACT is administered or the costs associated with it.
The primary driver for the merger, or so it has been reported, is in expansions outside the field of college admissions, in both K-12 testing, and in professional certifications. The ACT has a very well known name and brand, and it is quite valuable for those alone. This association will allow an expansion into new markets based on the ACT’s reputation for testing experience.
How Might This Impact You?
That depends on how old you are. If you’ve already taken the ACT, and don’t need to again, then congrats, this probably won’t impact you much (it still might, but not substantially). Instead, you can focus on other aspects of your college applications. Deliveries of past ACT scores to colleges are unlikely to be impacted.
If you’re planning to take the ACT in the next six months to a year, you are unlikely to see any significant format changes. While the new company may desire change, these things take significant time to both plan and implement. We will have significant warning before any content or format changes take place.
If you’re planning on taking the ACT more than a year out, then you may face a new version, or see one announced. We will, however, have plenty of forewarning for any such event, and based on their current announcements the company has no immediate plans to alter how the ACT is presented.
Pricing Changes
One thing to look out for, and which many people are concerned about, is the specter of price increases. This makes sense; the ACT was previously officially a nonprofit, while now they are primarily for profit. No cost increases have been announced yet, and we believe they likely will not be.
While raising costs, both for the tests themselves and for score deliveries would increase revenue, the ACT also wants to avoid losing market share to their main competitor: the SAT. If one increases their prices and the other does not, the more expensive option will lose market share. Of course, they may raise their prices in close succession, but neither one is willing to act unilaterally in this regard.
Instead, if they need to raise more capital, they will likely raise prices on the data they sell to universities. The demographic data of students is one of the major products they sell, so that universities can use it for advertising.
Why is This Happening?
While the reasons for this can only be speculated, we can make inferences based on the evidence. The first place to look is actually to College Board, the company which runs the SAT, amongst other services. They have been for profit this whole time, and quite profitable at that. By looking at their business model, we can perhaps determine what changes are coming, and why, for the ACT.
The first thing to note is that this extends beyond the ACT itself. Instead, it’s about the brand and testing expertise they have. College Board does more than run and administer the SATs after all. They are the ones who run the Common App, the CSS Profile, and AP tests, and they make money on all of these. They have vertically integrated the process of preparing for and applying to college, and are making money every step of the way.
This does not mean they are a monopoly; for every industry they control, they have a counterpart. The SAT has the ACT, the Common App has the Coalition App, AP tests have the International Baccalaureate. But the point is they have a finger in every pie, and are able to draw revenue from all of them.
We anticipate the ACT moving in a similar direction, looking to get more involved in testing earlier in high school, or with certifications for professionals. College Board has shown this can be a very successful business model.
We do want to add a final note on where the profit for these comes from, because it is not just fees for testing, or application fees. Sure, the Common App does draw income from these, but much more comes from the selling of data and licensing fees. Selling student data to colleges, contracts with colleges to use the Common App, contracts with school districts to offer AP Classes; there are many many sources of revenue available.
One thing to look out for, and that we hope will not happen, is the sale of student data to entities beyond colleges. While this has not happened yet, from either the ACT or SAT, big data is a major business in the information age, and both companies are setting on a vast mountain of it. This does not mean they will sell it, but you can be sure that if one does, the other will follow.
Final Thoughts
The ACT is a key part of the college application process for many students, as standardized tests are a key measure of your academic preparation for the rigors of college, especially as test optional policies come to an end. We hope this article has explained what’s going on with the ACT, why you shouldn’t worry too much, and where some concern may be necessary.
Of course, of far more worry for most students is how to ace the test itself. After all, the score you get materially impacts your chance of admission to a top college. We have a guide to the secrets of test prep for interested students, which goes over how you can best prepare to ace either the ACT or the SAT. If you want more personalized help, look into our test prep service. We have a long experience helping students prepare for the SAT and ACT alike, and are always happy to help you achieve your goals.
