Before one can define what a "nonconforming product" is, the product of the organization must be defined. And in order to understand the product, the customer must be defined.
Who is the customer? What is the product?
I would say the education system is what produces the product and is not the product itself.
Is the product life long learners? Some measure of competency? Grades? Graduate placement in other educational institutes? Placement in industry or business? There could be many, many different potential "products."
This is one of the core issues in the effectiveness of the educational systems in the US. The product is not clearly defined. I would say that most educational systems behave as though the product is grades.