I'll preface this by saying I was in a diploma school that enrolled a cohort of 65-75 students EVERY year, if they could find that many students. But they only graduated a class of 25-35 students, at most, consistently over the recent 4 years I have made it my business to track that school. That 25-25 is a mix of the original cohort, plus failed students from the previous year who were permitted to resume the program and repeat the failed term, plus a select few who'd either failed out or just plan transferred in from other area diploma schools. So, that means that the school actually fails MORE than 50% of the cohort, and since they have a consistent pattern of doing so, they actually INTEND to significantly whittle the size of a cohort. This could be due to the realities of the job market, meaning shrinking opportunities for their diploma grads to get hired. But since the diploma school has also consistently fed diploma grads to several area RN-BSN bridge degree programs, I believe the real reasons for this are 1) the hospital does not have the capacity to handle cohorts of greater that 25-35 students in Year 2, when students go into the more intense med-surg clinicals and capstone projects, and 2) enrolling such a large cohort generates double the revenue stream in Term 1, and this probably doesn't drop off much until much closer to the end of Year 1. Money in the bank for the school, and a raw deal for the >50% that will not graduate.
One of the tactics I firmly believe that school used to flunk people out was exams like you describe. Since I have other college degrees and 24 years of engineering experience for a major corporation, I can say that in ANY OTHER college degree or workforce development program, having 100% of students fail an exam would be inexcusable and whomever designed such and exam would be called on the carpet. NEVER would the students be blamed. Possibly lawsuits would be filed, since people's GPAs and future careers and financial aid and financial solvency are at stake. In other words, effery abounds in nursing schools, and rarely does the nursing school get the bad press and the public flogging it deserves. Instead, people choose to believe that the students have legitimately failed, and that this process of weeding out students via underhanded treachery and blatant fraud somehow ensures that only the truly deserving students go on to become RNs. As a mature adult, I can recognize a crock of stinking excrement without having to delve too deeply into it. >;-)
When I talked to the top students in my class who were managing to stay afloat, they all said their strategy was to NOT waste time reading the texts. They all said that what they did was simply go over and over and over the material that was covered in lectures and didn't even bother with the rest. You needed 80% to pass, and better than 80% of test material came from lecture handouts and notes, they said. (I on the other hand, did dutifully try to read and study and also RETAIN every bit of textbook assignment and lecture notes were were assigned, to physical and mental exhaustion and beyond. and my grades did nothing but fall.) Ymmv. But just be advised that there may games at play here, and students need to think strategically and not just naively that the school has the best interests of all of you at heart. In cases like this, maybe students and parents need to get attorneys involved, and also need to go to the local Workforce retraining personnel at (usually) the local unemployment office, and make them all aware of it when something very odd like this happens.