“Big Education’s” Big Problem

By: Sean Ferris

Many of our CONA student members are beginning to face the daunting task of graduating high school and deciding what the next step in their lives will be. Nearly all of us will encounter many of the “Big Education” non-profits that facilitate the major facets of the college process. As we begin our individual adventures into our lives and careers, it is important to be aware of just how much money these organizations receive from us without being taxed.

Under 501(c) of the Internal Revenue Code, organizations can be identified as non-profits if none of the earnings accrued are inured to any private shareholder or individual. And while all of these companies like the College Board, ACT Inc., and Common App complies with such codes on paper, often their financial history tells a different story.

The College Board, as previously mentioned, has been scrutinized for their financials many times over. As they facilitate both the Advanced Placement curriculum and exams, along with the SAT, they are a very influential company in students’ lives. Since the College Board has quite a large number of expenses with all of the services it provides, it is to be expected that some of them will cost money to take advantage of, like the AP Exams. However, even as the number of exams given has grown, and thus more expenses have been accrued, the profit the company walks away with every year is staggering. On record, yearly, the company pockets about 75 million dollars with no taxation. As an acclaimed non-profit company, profits are essentially a glorified rainy day fund that they often invest to gain even more revenue for the company. These profits, coupled with the rising prices of testing for students is where the issue lies. If the trend continues how it has been, AP exams will reach a $100 price tag in the coming years. Many students and parents find this to be unreasonable for their financial situations. It leaves many to wonder why these prices rise when, seemingly, the company is as financially successful as it is, even with it supposedly being a “non-profit”.

One point of contention for many people is how much executives are paid in these companies.

CEO of College Board, David Coleman, was given 1.4 million dollars in compensation for his work at the organization. This trend continues as many of the other executives are given compensation around half of a million dollars. This group of a dozen executive’s pay accounts for about 3% of the total compensation given to all employees in the College Board. As a non-profit that isn’t supposed to be enriching any members of its company, it certainly seems to be doing so. And as much as this sounds as though the organization is using its earnings to enrich an individual or group, it is completely legal. Under IRS code, high compensations for non-profit employees are not against section 501(c), as previously mentioned. It is often par for the course for big education organizations to compensate their higher-ups handsomely. Kurt Landgraf, now the former president and chief executive officer of the Educational Testing Service, earned $1,307,314 for the 2013 fiscal year in reportable compensation. ETS is a non-profit that provides a large number of testing services that range from K-12 to professional certifications. Like the College Board, the executive board’s compensation accounts for a large chunk of the company’s total compensation expenses even as they claim to be non-profit.

Similar executive pay could be found in the various “for profit” colleges such as Corinthian and ITT Technical Institute. A “for profit” college is defined as an institution of higher education owned and operated by a private, profit-seeking business. In the past few years, almost 900 of these institutions were shut down due to defrauding students. They were lying to students about their tuition and did not provide the education or certification necessary for the degrees they were hoping to receive. In Corinthian’s most successful financial year, they were found to be paying many of their executives upwards of a million dollars. While both these for-profit and non-profit educational organizations pay their executives similarly, to give College Board and their fellow non-profits some credit, they still provide far better educational services. While it can be argued this is a result of their monopoly hold on their particular market sectors, they are actually providing useful, and in many cases, a necessary part of the college process.

Organizations like College Board and Common App, while having some competitors, largely have a monopoly-like hold on the education market. This allows them to do what they want to make a lot of money unchallenged and untaxed. While they provide services necessary for access to college, these organizations have set themselves up in these niches and made themselves, seemingly, the only choice. However, there is hope. Instead of falling into the trap of enriching these companies and executives, many of us can use organizations like Coalition for College. This organization can be used as an alternative to Common App, and helps minorities apply to college. While no particular organization is perfect, using a variety of them instead of giving one or two our full patronage will make sure to keep the sector competitive. This should help keep the consumer in charge of the market, encouraging companies to improve their services instead of raising their prices at will.