The Collapse in Demand for Standardized MBA Admissions Tests (Part 1)

The Testing Demand Collapse

For a clear picture of how far admission testing has fallen, you can look at the searchable database maintained by FairTest, the National Center for Fair & Open Testing. Since 1983, this advocacy group has worked to “end the misuses and flaws of standardized testing and to ensure that evaluation of students, teachers, and schools is fair, open, valid, and educationally beneficial.”

FairTest reports more than 2,085 accredited bachelor’s degree‑granting colleges and universities with ACT/SAT‑optional or test‑free admission policies for students seeking to enroll in fall 2026 or later. According to recent National Center for Education Statistics data, there are about 5,760 Title IV‑eligible higher‑education institutions overall in the 2024–25 academic year, including four‑year and two‑year schools. In other words, over 90 percent of U.S. colleges and universities will remain test‑optional for 2026 admissions, based on FairTest’s summary of current policies.

This test‑optional and test‑free group includes many of the most visible brands in U.S. higher education. The University of Chicago helped kick off the modern wave of change when it made the test optional for undergraduates in 2018, and the University of California system has moved to a test‑free stance for SAT and ACT scores since 2020. Other highly selective universities have also adopted test‑optional policies for recent admission cycles.

This broad shift toward test‑optional admissions, which accelerated after 2018 and during the Covid‑19 pandemic, created years of mounting pressure for ETS and other testing providers. As graduate and undergraduate programs normalized test‑optional policies, the GRE’s customer base shrank sharply, and its popularity collapsed, contributing directly to the demand crisis described in this article.

GRE volumes tell part of the story. ETS‑based summaries show that GRE General Test taker counts fell from over 500,000 tests in the late 2010s to roughly 250,000 by the 2023-24 testing cycle, a drop of about half. In response, ETS redesigned the GRE into a much shorter exam, reducing testing time from nearly four hours to just under two hours starting September 22, 2023, by shortening sections and removing unscored parts.

At ETS, Did the “Bullet Hit the Bone?”

ETS started in 1947 when three groups—the Carnegie Foundation for the Advancement of Teaching, the American Council on Education (ACE), and the College Entrance Examination Board—joined together to create a nonprofit focused on educational testing. Today, ETS calls itself the world’s largest private nonprofit testing company, handling over 50 million tests each year for K‑12 students, college applicants, and graduate programs.

ETS’s main product is the GRE, which it has run since 1947 and calls its top earner. In recent years, ETS has pushed the GRE as an all‑in‑one test for different graduate programs to compete with tests like the LSAT (which ETS lost in 1982) and GMAT (lost in 1993).

In June 2024, the College Board ended its contract with ETS to run the SAT, a huge blow since that account brought in about one‑third of ETS’s revenue, roughly $300 million a year, based on 2023 audits.

ETS operates as a billion‑dollar company with about 2,500 employees in over 200 countries. Based in the New York suburb of Lawrence Township, New Jersey, not far from Princeton University, its opulent headquarters and lush landscaping adjacent to a famous duck pond reflect the organization’s royal stature as gatekeepers on top of the world’s education industry.

But now, how is ETS going to maintain all that opulence? It’s difficult to overstate how critical the College Board’s account has been to the survival of ETS and how devastating that loss could become.

Data from the ProPublica Nonprofit Explorer shows that even before the College Board’s firing, and because of the collapse in demand and steeply declining sales due to years of universities’ test-optional policies, ETS was bleeding cash. In 2023, ETS earned $1.058 billion, but its expenses were $1.067 billion, meaning it lost almost $10 million that year. What’s more, ETS was certainly helped by its nonprofit status since, as a public for-profit company, it would have also been responsible for a corporate income tax rate of 21 percent.

Latest data from ProPublica shows ETS earned $1.092 billion in 2024 but spent $1.069 billion, posting a small profit of about $23 million. Despite the profit, layoffs continued into late 2025 as ETS cut costs amid test‑optional trends and contract losses.

This detailed report from a local New Jersey online magazine called Planet Princeton chronicles the layoffs at ETS. It turns out that ETS began layoffs in April 2020, four months after the pandemic started, and carried out layoffs four times between then and September 2021. That was the pandemic year when the number of students taking the SAT had been cut in half, from 1.5 million to 700,000.

ETS chief executive officer and Harvard MBA Amit Sevak tried to put a positive spin on news of the latest job cuts, claiming that by offering voluntary severance agreements, ETS was “putting this decision in [employees’] hands. The purpose is to reduce our staff in the most gracious way we can,” he said. “This is an opportunity.”

But that’s not how the rank-and-file employees viewed that news. Based on what a longtime ETS employee who had received the buyout offer told Inside Higher Ed, the situation at ETS appears to be dire.

“It’s been an hour since the news broke, and folks are earnestly sharing self-harm and suicide-prevention hotlines,” the employee said.

Inside Higher Ed had also obtained responses to an internal ETS employee satisfaction survey around the time of the September 2023 layoffs, which had confirmed the source’s reporting that morale had been low throughout the company for a long time. But the anonymous employee also reported that morale had fallen even further since the fall job cuts, and that more bad news had been generally expected within ETS for months.

“There are so many people who just want to do their jobs, for their work to improve, and that hasn’t happened,” said the source. “We’ve all been kind of waiting for the bullet to hit the bone.”

That may or may not have been what had happened with these job cuts. In a video released to employees, Sevak said that for those who don’t accept the buyouts, the pace of change at ETS would be “intense,” and that the holdouts would all be expected to give “110 percent.” He also warned them that “when this process of voluntary separation is over, it is likely that we may need to proceed with an involuntary layoff.”

Upheaval at ACT

Other testing companies besides ETS have felt the pain from falling demand. The American College Testing Program (ACT), ETS’s main rival and the top college entrance exam in the Midwest and Great Plains, reported $78.5 million in net losses from 2020 through 2022.

ACT lost test takers because 400,000 fewer students took the ACT in 2025 than in 2019 (1.38 million vs. 1.78 million). That drop was steeper than the SAT’s decline of 220,000 students (2 million vs. 2.22 million) in the same period. In 2023, ACT laid off 100 employees and began selling buildings at its Iowa City headquarters near the University of Iowa.

But in a huge shakeup for the standardized testing sector, ACT was acquired in April 2024 by a private equity firm, Nexus Capital Management. Nexus plans to take ACT private, and that’s raised alarm among observers.

Dr. Charlie Eaton, a professor of sociology with the University of California at Merced, told Inside Higher Ed’s Liam Knox that the Nexus purchase of ACT concerns him. The author of the 2022 book Bankers in the Ivory Tower, published by the University of Chicago Press and an expert on higher education finance, Dr. Eaton said that private equity firms bolstered the rise of exploitative for-profit colleges. “Private equity investors oversaw much of the growth in for-profit colleges that sucked up federal student loans and other subsidies,” he said.

GMAC’s Greatest Loss In History

In addition to the poor sales at ETS and ACT, sales of the Graduate Management Admission Test (GMAT) in the United States have been hammered particularly hard, after those sales had sunk in 2021 to a record low of merely 38,509. That low had never before been observed in the 70-year history of this examination, first launched for applicants to MBA programs in 1954.

The contrast with earlier years is striking: in the exam’s peak year of 2012, a record 117,511 tests were taken in the U.S. alone. That means the test volume plummeted by 67 percent during those nine years. The 38,509 volume also represents a decline of nearly half (48 percent) from the last pre-pandemic academic year of 2018-2019, when examinees sat for 73,556 U.S. exams.

As a result, the Graduate Management Admission Council, which administers the GMAT, turned a profit for only a single year during the last four years when records were available, between 2019 and 2022. That happened in 2021 when the Council posted a $9.9 million profit. But in 2019, GMAC lost $5.7 million; in 2020, it lost $3.4 million; and in 2022, the Council posted its greatest loss in history of $6.6 million.

Poets & Quants’ editor John Byrne says that the collapse in demand for the GMAT and GRE was brought about by the pandemic because it caused many business schools to grant waivers for standardized tests to more applicants, or to switch to test-optional policies. “Just 2 percent of the latest cohort of students to join the online MBA program at the University of North Carolina’s Kenan-Flagler Business School submitted a GMAT for entry; another 2 percent handed over a GRE score,” he wrote in January 2022. “At Indiana University’s Kelley School of Business, just 19 percent of the latest Online MBA cohort took a GMAT test, while 9 percent sat for the GRE.”

However, Byrne also cites the explosion of online business degree programs like those we track here at BSchools as a second factor leading to the collapse in demand for both the GMAT and GRE.

“New programs launch in business master’s and online degrees; moreover, they rarely require the submission of a standardized test,” he says. “The vast majority of these programs do not require a GMAT or GRE for admission, and some of them make clear that they believe the test reflects racial disparity and perpetuates inequity. So the GMAT and the GRE are not fully sharing in the growth of what is the fastest-growing sector of graduate management education.”

Byrne also says that competition made for a third factor that reduced sales of the GMAT. That’s because the GRE has consistently taken market share away from the GMAT in recent years. Despite its overall plummeting sales, the GRE now controls 23 percent of the business school market—triple the 7.6 percent it controlled in 2016.

During the same period, the proportion of MBA students who took the GRE instead of the GMAT has doubled or tripled, based on totals counted through the fall of 2022.

Poets points out that students admitted with GRE scores now amount to more than a third of the MBA classes at Yale, Michigan, Dartmouth, Duke, and Notre Dame. In Harvard Business School’s Class of 2023, 29 percent won entry with GRE scores, more than double the 12 percent in 2020. And the GRE has transformed into the dominant test taken by more than half of all admits at Georgetown, Ohio State, Washington University in St. Louis, and the University of Pittsburgh.

Some of these examples are dramatic. For example, at the University of California, the Haas School of Business in Berkeley started with only 11 percent of the MBA cohort admitted with GRE scores in 2018, but in the 2022 class, almost half (45 percent) sat for the GRE: a 309 percent increase. At Stanford’s Graduate School of Business, a third of a recent class enrolled with GRE scores, up from 18 percent five years earlier, for an 83 percent increase. And at the University of Pennsylvania’s Wharton School, only one in ten applicants submitted GRE scores in 2018—and that percentage jumped to 30 percent in 2022, a 200 percent increase.

Coming Up in Part Two

In Part Two of this report, we examine two recently emerging factors that are further accelerating the collapse in demand for standardized testing among MBA and master’s degree program applicants.

The first of these factors involves a comprehensive meta-analysis reviewing 208 studies of the GRE’s predictive validity, a report compiled by professors from Utah State University and China’s Binzhou Medical University. The professors concluded that the GRE predicts just 2.25 percent of variance across graduate outcomes, 2.56 percent in first‑year GPA, and four percent in overall GPA, results that question its value for admissions.

The second factor involves the rise of performance-based admissions. The most disruptive higher education trend in decades, performance admissions, represents a dangerous threat to testing firms like ETS because this new paradigm obviates any need for admission testing.

What’s more, recent internal data from two graduate engineering programs shows that when given a choice between traditional and test-free performance admissions, 100 percent of applicants chose the performance admissions pathway.

We then conclude our report by speculating that the Educational Testing Service, as we know it, faces a future where bankruptcy and reorganization are highly likely scenarios. Don’t miss Part Two of our report on the decline and fall of ETS and the standardized testing industry.