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You misunderstand why colleges use SAT/ACT scores for college entrance. It is not used to predict IQ, or who deserves to be in college. It is used to determine the probability that you will indeed complete a course of study. The argument has been that SAT/ACT/GRE scores are directly correlated to GPA. They are indeed correlated, but only to a very small significance. This isn't the relaxation of standards, this is the removal of a statistically invalid measure (that also happens to be culturally biased).
An interesting point, JG. You're right that SAT doesn't correlate well with graduation rates (I had to look it up). So perhaps I'm being illogical here. I'll look more into it...
Thank you for the comment.
drm
I wholeheartedly agree that lowering standards just to accommodate students is a terrible idea. I am not sure that keeping standardized tests is the way to go, however. If a student is a good test taker, s/he may not necessarily be capable of performing adequately in class. Poor test takers may not be capable either, of course, but there could be alternate standards for matriculation that may allow a broader pool of students to have a chance to succeed.
I suspect that part of the reason for this trend is to increase enrollment. The administrators of some colleges and universities are under tremendous pressure to increase enrollment. More students means more tuition money. It also looks good on an administrator's resume to say that enrollment increased as a result of their management. An administrator's success is measured largely in terms of enrollment growth.
Of course, it sounds much better to say that the tests are being dropped to ensure fairness. Nobody would want to admit to lowering standards.