Private Equity Takes Over ACT: What Tutors Need to Know About ACT's Shift to For-Profit
The American economy has witnessed private equity firms continue to expand their influence in various sectors, and the education industry is not immune to these changes.
A significant shift occurred recently in the standardized testing world that educators and tutors should be aware of: ACT was acquired by Nexus Capital Management, a Los Angeles-based investment firm. ACT’s transition from a nonprofit to a for-profit entity has sparked widespread concern among education professionals.
What Happened?
In April, ACT announced its acquisition by Nexus Capital Management. Janet Godwin, the CEO of ACT, emphasized that this move would enable the organization to expand its offerings into job readiness areas while staying true to its mission of helping students succeed. Godwin assured that the cost of taking the ACT®, which currently ranges between $70 and $100, would remain unchanged. However, the decision to shift to a for-profit model has raised eyebrows and led to questions about the future direction of the organization.
Why the Concern?
The skepticism surrounding this acquisition stems from broader concerns about private equity's influence on public goods and services. Private equity firms typically acquire companies, make them profitable, and eventually sell them to generate returns for investors.
While this model is not inherently negative, it can lead to significant changes in how organizations operate, often prioritizing profit over other considerations.
Randi Weingarten, president of the American Federation of Teachers, has expressed concern, arguing that the new structure creates "incentives for misconduct" and questioning whether a profit-driven entity should manage a significant educational tool like the ACT. Weingarten noted,
“The ACT has become a public good, relied upon by millions of students to realize their college dreams. That’s why it’s inappropriate for such a significant educational tool to be run by a profiteering private equity fund.”
Top Implications for Test Prep and Students
With ACT now a for-profit company, time will only tell whether or not these changes will significantly impact the test-prep industry and ACT® test takers. At this point, the two major effects of this development that we’re keeping a close eye on are:
1. Changes in Test Administration: The move to a for-profit model might result in changes to how the ACT® is administered. This could include the introduction of new services or modifications to existing ones, which may affect how students prepare for and take the ACT®.
2. Cost and Accessibility: Although ACT officials have pledged not to increase test costs, there may be concerns about future affordability and accessibility, which could impact students' ability to take the test.
Again, these are the major implications that we foresee at this stage in the game, but it’s early days.
Looking Ahead
Staying informed about these developments is obviously essential to provide the best guidance and support to your clients and address concerns with your clients about the stability and transparency of the ACT® under its new ownership. It's crucial to stay informed about any changes in policies or practices that could impact test takers and practice clear communication about those changes as they are announced.
While the full implications of ACT's transition to a for-profit entity remain to be seen, being proactive and knowledgeable about these changes will help you and your clients navigate these changes more effectively.
Encourage open discussions with your students and their families about changes like these in standardized testing. By doing so, you can help them make well-informed decisions about their test-prep goals. The world of education is continuously changing, and staying ahead of these changes is key to helping your students succeed.
Key Takeaways
ACT was acquired by Nexus Capital Management, transitioning from a nonprofit to a for-profit entity.
There is concern about private equity's influence on public goods and services.
The American Federation of Teachers highlighted the potential risks of prioritizing profit over educational integrity.
Possible introduction of new services or modifications affecting test preparation and administration.
Concerns about future affordability and accessibility despite current cost assurances.
Stay informed and communicate changes clearly to your clients.
Encourage open discussions with students and families to help them navigate these changes effectively.
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