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What鈥檚 the harm of a little grade inflation? After all, the kids are happy. The parents are proud. And the administrators are satisfied, with more students making progress toward graduation.

Of course, if students don鈥檛 fully master the content in a given class, they may struggle to succeed in the next one. And once they graduate, they could go out into the labor market knowing just a little bit less than they would have otherwise.

Educators across grade have been the about students who aren鈥檛 adequately prepared to succeed in their class. They鈥檝e been forced to adjust their assignments and lower their standards.

But it can be hard to quantify the longer-term impacts of grade inflation.

Now, a from Texas economist Jeffrey Denning makes that connection: His team found that grade inflation actually does lead students to learn a little bit less in school. And, when students who face lower grading standards go out into the labor market, they really do earn a little bit less money than their peers who had to deal with tougher graders.

For a long time, all anyone has known about grade inflation is that it was . Denning鈥檚 paper cites survey evidence from the National Center for Education Statistics showing that high school grade-point averages have risen by 0.48 points since the mid-1980s. College GPAs have risen by almost as much.

To look at both the short- and long-term effects of grade inflation, Denning鈥檚 team used data from the Los Angeles Unified School District and from all public high schools in Maryland. They started by breaking grade inflation into two components. The first is what they call passing-grade inflation, which occurs when a teacher has a low bar for what level of work should receive a D or better, as opposed to an F. The second type is mean grade inflation, which measures how much a teacher raises students鈥� grades, on average, in relation to their objective performance on standardized tests.

It turns out that the two have opposite effects. Passing-grade inflation can benefit students because, with a reduced risk of flunking out, they鈥檙e more likely to stay in school, less likely to be held back and more likely to graduate from high school. Importantly, this type of grade inflation did not seem to harm academic achievement.

However, when teachers inflate the average grade they give out, it has negative effects that begin playing out almost immediately. Students who were taught by a teacher with lower grading standards had observably lower test scores in the following year than their peers whose teachers were tougher graders. This type of grade inflation also reduced high school graduation rates and led to fewer students taking the SAT in preparation for college.

Even worse, Denning鈥檚 team documented that the harmful effects of this type of grade inflation trickle into early adulthood. Compared with students taught by educators with more honest grading standards, students whose teachers inflated their grades were less likely to enroll in any form of postsecondary education and to be employed up to six years after high school graduation (when their study stops). The differences were not that large for any individual, but as a whole, the students with the more lenient teachers earned $56 less one year after graduation and $145 less six years later. Those results were statistically significant and grew over time. Moreover, these estimates are for one student taught by one teacher. A typical high school teacher reducing standards for 90 to 100 students reduced their collective lifetime earnings by $213,872 per year of teaching. 

Denning鈥檚 team did not find that grade inflation was any more or less harmful to certain student groups. But evidence from Virginia suggests that it may be more prevalent in classes with historically underserved students. Matt Hurt, the director of a of public school districts in Virginia, high school test scores in the state and found that, in 2025, 5.5% of white students earned an A in a high school course in the same year they failed the state exam in the same subject. For non-white students, the rate was 12.2%. For students with disabilities, it was 27.2%.聽

In other words, Virginia schools tend to be relatively accurate about the chances a white student will pass the state test, while grades are more misleading for kids of color and those with disabilities. Other research has found that lenient grading standards are most harmful to students who are the furthest behind. 

To analyze these disparities in Virginia, Hurt created an index that compared high school course grades against the state鈥檚 end-of-year exams. Because Virginia has tests for a wide variety of grades and subjects, he ended up with a sample of almost 400,000 grades and tests. He found that comparing these was highly predictive of a district鈥檚 overall scores and concluded that 鈥淗igh expectations appear to be one of the major factors which differentiates highly successful divisions, schools and teachers from those less successful.鈥�

The goal for teachers and policymakers should not be harsher grading for its own sake. But as more students appear exceptional on paper, the signaling value of grades has diminished over time. While parents may value course grades, they are, in many instances, being misled about their child鈥檚 true achievement level. Over time, grade inflation risks weakening one of the core purposes of grading: providing honest feedback about where students stand and what they still need to learn.

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