The impact of hidden grades on student decision-making and academic performance

Colleges and universities work hard to create environments that encourage student learning, and they develop grading policies, in part, to motivate their students to perform well. Grades provide two kinds of information about a student's abilities and learned knowledge: internal information that informs the students themselves about the university's assessment of their talents and competencies; and external information that informs faculty, other institutions, and potential employers about student performance. At the Massachusetts Institute of Technology (MIT), freshman grading policies were changed in the fall of 2002 in an effort to better prepare freshmen for the academic rigors of sophomore year and beyond. Prior to the 2002-03 academic year, all freshmen at MIT received "hidden" grades in both semesters of their freshman year. A hidden grade is a letter grade that is communicated to the student but is recorded as pass/no-record on the student's official transcript. Beginning in the fall of 2002, freshmen received hidden grades for the first semester only of their freshman year. Therefore, pre- and post-2002 freshmen received the same internal information on their grades in the second semester, but post-2002 freshmen were subject to this information being shared externally. In this study, I estimated the causal impact of MIT's having hidden versus externally-shared grades on subsequent student decision-making and academic performance by taking advantage of the natural experiment that was inaugurated by this policy change. I looked specifically at the impact of the grading-policy change on freshman spring semester GPA, credit units taken, the probability of declaring early sophomore status, and the probability of taking a more mathematically advanced version of Physics II. I found that freshmen with externally-shared grades, on average, earned higher GPAs, had a higher probability of declaring early sophomore standing, took slightly fewer credit hours, and had a slightly lower probability of taking a more rigorous version of Physics II, compared to freshmen with hidden grades second semester. Also, for three of my four outcomes, I found that the estimated effect of the grading-policy change differed by the level of a student's pre-college academic performance.