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Not-for-Profit College Board Getting Rich as Fees Hit Students

When Gaston Caperton was recruited to run the College Board, owner of the SAT entrance exam, he said he didn’t want to just run “a testing company.”

Founded by Harvard and 11 other universities in 1900 to create a standardized test to admit students based on merit rather than family connections, the College Board by 1999 was facing cash-flow problems.

Caperton turned the nonprofit company into a thriving business, more than doubling revenue to $660 million by boosting fees, expanding the Advanced Placement program and the sale of names of teenage test-takers to colleges. A former West Virginia governor, he persuaded 11 states to cover fees for a preliminary SAT in the 10th grade.

Now, Caperton is planning to retire amid concern that the College Board’s improved revenue has come at the expense of students and their families, who pay hundreds of dollars in fees even before they apply to college, parents, admissions officials and high school counselors said.

“The College Board is more interested in marketing and selling things than it is in its primary responsibility, promoting equity and educational opportunity,” said Ted O’Neill, who stepped down as admissions dean of the University of Chicago in 2009 and served on several College Board committees.

Source: College Board via Bloomberg

Gaston Caperton, president of the College Board. Close

Gaston Caperton, president of the College Board.

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Source: College Board via Bloomberg

Gaston Caperton, president of the College Board.

The revenue growth is a reflection of serving more students and providing more services, Caperton, 71, said in an interview at the College Board’s New York headquarters.

Commitment to Education

“The College Board’s commitment to education was the impetus for every initiative we have undertaken during the past decade,” Caperton said in a follow-up e-mail.

The group gave $53 million in fee waivers and subsidies for all its programs in the year that ended in June, with one student in five in the class of 2011 taking the SAT for free. The organization is dedicated to an “equity agenda” and has expanded access to higher education, especially for the poor, African-Americans and Hispanics, Caperton said. Low-income students can take the test twice, along with as many as six SAT subject tests over two sittings at no charge.

“I happen to believe whether you’re running a government or you’re running a not-for-profit that you have to run it in a business-like way, which means that you have to have your revenues more than your expenses,” he said.

Another trend driving the College Board’s rise in revenue is that students today apply to more colleges. The percentage applying to seven or more schools almost doubled to 25 percent in 2010 from a decade earlier, according to the Cooperative Institutional Research Program’s Freshman Survey, which polled more than 250,000 students under the auspices of the University of California, Los Angeles.

Photographer: Mayra Villavicencia

Hector Del Real, who will attend Dartmouth College took about three months of working Sunday shifts of eight to 10-hours in a warehouse to afford college board fees, including the SAT and AP tests. Close

Hector Del Real, who will attend Dartmouth College took about three months of working... Read More

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Photographer: Mayra Villavicencia

Hector Del Real, who will attend Dartmouth College took about three months of working Sunday shifts of eight to 10-hours in a warehouse to afford college board fees, including the SAT and AP tests.

Admissions Frenzy

The College Board is responding to the frenzy around college admissions, offering upgraded services to those who are willing to pay, said Bob Sweeney, a guidance counselor for 25 years at Mamaroneck High School, outside of New York.

“The College Board is capitalizing on the perceived and exaggerated importance of the SATs,” Sweeney said in an interview. “The fees are symptomatic of the frenzy of it all, how much we’ve all put the testing and the results on a pedestal.”

The SAT costs $49 if students register about three weeks in advance, up from $23.50 in 1999, when Caperton took the helm. Those who want to rush results to a college pay $30 extra for the first school and $10.50 for each additional. SAT test takers pay $25 to change their exam date, $43 more if they want to “stand by” for a test and show up without signing up in advance. It costs $18 for the “question-and-answer” service, which lets students study their past exams.

‘Anxious Parent’

The company’s “Score Choice” program lets students who take the test more than once send their highest scores in the individual math, reading and writing sections to colleges.

While such services are voluntary, an “anxious parent or student ignores them at their peril,” said Patrick Hayashi, who served as a College Board trustee from 2000 to 2004 and is a former associate president of the University of California.

Some charges, such as rush fees, have become “exploitative,” said Bruce Poch, who stepped down in December as dean of admissions at Pomona College in Claremont, California. “The fees go almost unnoticed because it’s not like writing a tuition check, one lump sum. It adds up over time.”

Test company rival ACT Inc., based in Iowa City, Iowa, generated revenue of $274 million in the year ended August 2010, including $216 million from academic testing and $45 million for workforce development programs, according to a tax filing.

ACT Fees

ACT -- which charges $49.50 for its test, about the same as for the SAT -- hasn’t come under as much criticism because it has a lower profile than the College Board and doesn’t offer as many services such as an Advanced Placement program or subject tests. The cost to rush an ACT score to a school is $15. It costs $21 to change an ACT exam date, 16 percent less than for the SAT.

Samantha Karp, 18, paid more than $800 for two PSATs, two SATs and two SAT subject tests, and to complete six Advanced Placement classes at her high school in Roslyn, New York. She also paid for a study guide, two student-answer services, two change fees and to send her test scores to 14 colleges.

“This is the system today,” said Natalie Karp, 49, Samantha’s mother, who took the SAT once, about 30 years ago, before applying to two schools. She attended the State University of New York at Binghamton. Her daughter will start at Colgate University in Hamilton, New York, this month.

While $86 may seem small compared with the cost of college, the fee almost prevented Geoffrey Vedernikoff, whose father is unemployed, from taking an Advanced Placement test in government at his Los Angeles high school. The tests allow students to earn college credit for high school courses, potentially lowering their college tuition costs or letting them graduate early.

‘$86 Bucks’

Vedernikoff, whose parents emigrated from Moscow, didn’t qualify for a fee waiver because his mother makes about $65,000 a year as an accountant. He paid for one Advanced Placement test, but decided taking a second was too expensive.

“I didn’t want to spend 86 bucks because I didn’t think I needed government in college,” said Vedernikoff, 17, who was his class valedictorian. He starts at the University of Pennsylvania in Philadelphia this year.

His government teacher, Karen Magee, disagreed. They discussed his dilemma and she stepped in to pay for the test. Many teachers at the school pay fees for kids who can’t afford them, she said in an interview.

“He’s a brilliant kid and he works very hard,” Magee said. “It’s so much money. The system was dumb and unfair that he shouldn’t be able to reap the rewards of the test.”

Dartmouth-Bound

Advanced Placement exams contain essay questions that are scored by college professors and teachers across the U.S. “It’s an expensive, but highly effective and valid process,” said Peter Kauffmann, a spokesman for the College Board.

Paying fees paid off for Hector Del Real, the son of Mexican immigrants in Inglewood, California. While he qualified for some waivers, he still spent about $760 on College Board fees, including $169 to fill out and send a financial aid profile -- which schools use to determine eligibility for scholarships -- to nine colleges. It took the 18-year-old almost three months of working a Sunday shift of eight to 10-hours in a warehouse to raise the money. His father, a tree trimmer, makes about $55,000 a year, while his mother recently lost her factory job.

Del Real, who had a 3.95 grade-point-average, will attend Dartmouth College this year on an almost full scholarship. His parents will pay about $3,000 a year to the Hanover, New Hampshire, school, which charges about $55,000 for tuition, room and board, and Del Real is taking out a $7,800 student loan for the first year.

Solid Footing

Caperton has been committed to opening opportunities for low-income and minority students, said Richard Riley, the secretary of education under President Bill Clinton.

“Equity was an important matter for him,” said Riley, who’s known Caperton for more than 25 years.

In 1999, the College Board recruited Caperton from Teachers College at Columbia University, where he founded and ran the Institute on Education and Government. He also was a fellow at Harvard University’s Institute of Politics. A Democrat, he served two terms as West Virginia’s governor from 1989 to 1997.

At the time, the College Board took in income only at certain times of the year and wanted to increase reserves so that it wouldn’t need to borrow money, said Michael Behnke, a former trustee who sat on the search committee that hired Caperton.

The board believed Caperton -- whose compensation including deferred pay was valued at $1.3 million in the year ended June 2010 -- could put the company on solid financial footing, Behnke said.

Congressional Inquiry

Caperton worked to bolster revenue, expanding products such as the Student Search Service, which sells to colleges the names of test takers at 33 cents each. The company had $63 million in sales from its business that includes selling names in the year ended June 2010, almost 10 percent of total revenue.

The company’s name-selling business and that of ACT prompted an inquiry in May from U.S. Representatives Ed Markey, a Massachusetts Democrat, and Joe Barton, a Republican from Texas. The College Board believes “protecting the privacy rights and safety of young people must always remain a paramount concern,” the company wrote in a June letter to the lawmakers.

About a year after joining the College Board, Caperton said he met with Jeb Bush, then governor of Florida, to discuss giving the PSAT to every student in Florida in 10th grade to increase the number of poor and minority students going to college. Florida began funding the program in the 2004-2005 school year, according to the state’s department of education.

Lobbying Costs

By 2008, 10 states agreed to pay fees to the College Board for 10th-graders to take the PSAT, according to a College Board newsletter. Texas appropriated money a year later.

Part of the impetus in appealing to states was the rise of the ACT, created in 1959 as a test of achievement rather than aptitude. It is especially popular in the Midwest and West. Of students who graduated high school in 2010, some 1.57 million students took the ACT, with about 28 percent coming from the seven states that require the test, ACT said. Almost 1.6 million took the SAT, according to the College Board.

The College Board spent $726,000 on lobbying in the year ended June 2010, while ACT, spent $101,000 in the corresponding fiscal year, according to tax returns.

The Texas legislature allocated $26 million in 2009 to fund tests for two years. It declined to extend funding this year due to budget cuts. Individual school districts can still pay for the tests on their own. South Carolina and Hawaii, which had previously paid for the tests, have also cut off funding.

‘Fair and Equitable’

One way to ease the pressure on students and families would be for the College Board to bundle costs, giving discounts to students who, for instance, take multiple Advanced Placement exams, along with the SAT and SAT subject tests, said Poch, the former Pomona dean of admissions.

Poch also suggested that colleges take on some of the fee burden, particularly for students applying for financial aid. The schools might be able to negotiate discounts with the testing companies, he said.

That would make the process “more fair and equitable,” Poch said.

To contact the reporter on this story: Janet Lorin in New York jlorin@bloomberg.net.

To contact the editor responsible for this story: Jonathan Kaufman at jkaufman17@bloomberg.net.

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