A lenient high school teacher who inflates grades reduces their students' earnings by about $56 to $145 per year in the six years following graduation, according to a new study by economist Jeffrey Denning published with the National Bureau of Economic Research on June 25, 2026. The research examined data from the Los Angeles Unified School District and all public high schools in Maryland, finding that one typical grade-inflating teacher educating about 90 students a year reduces their collective lifetime earnings by $213,872 for every year that cohort spends in that teacher's classroom. The study argues that while grade inflation might seem harmless or even beneficial in the short term, it carries real economic costs that follow students into adulthood.
The average high school GPA has increased about .48 points since the late 1980s, according to data from the National Center for Education Statistics cited in the study. College GPAs have followed a similar upward trend. A 2022 study comparing teacher-assigned grades to standardized test scores found "evidence of grade inflation without and with accounting for student and school characteristics," confirming a wide research consensus pointing to rising grade inflation across the nation in all types of schools. The phenomenon isn't limited to certain regions or school types—it's happening everywhere.
Denning's team divided grade inflation into two distinct categories with very different effects. The first, average-grade inflation, raises the average grade each student earns, making it easier for academically secure students to earn impressive course grades without full content mastery. The second, passing-grade inflation, lowers the bar for what constitutes a D versus an F, helping struggling students scrape through to a diploma. For passing-grade inflation, the report finds "no effect on future test scores in math or English," though these students are more likely to graduate and there's "some suggestion of a shift away from four-year and toward two-year college enrollment and increases in earnings in the first few years after expected high school graduation." However, researchers found no evidence that early pay bumps continue even six years after graduation.
The damage from average-grade inflation runs deeper and lasts longer. Students who experienced lax grading saw a "meaningful impact" of lower scores on subsequent tests compared to peers who studied under more rigorous graders. These students were less likely to take the SAT and potentially less likely to graduate high school, according to the report. They enrolled in postsecondary education at lower rates and were less likely to be gainfully employed in the six years after high school that the study tracked. The report explains that students who receive inflated grades likely recognize they possess grades they didn't truly earn, leading them to lower their academic ambitions. When grades don't honestly reflect achievement, students lose respect for their own work ethics and the integrity of their academic institutions, undermining the development of character traits that matter in the workforce.
The study recommends grading reform that ties final scores to objective standards of mastery rather than mere course completion. One specific solution proposed is requiring standardized end-of-course exams that represent a significant portion of a student's final grade, providing an important counterweight to potential grade inflation during the semester. The report emphasizes that policy goals shouldn't include "harshness for harshness' sake" or unreasonable standards, but schools must appropriately challenge students at each stage to grow their minds and abilities. The bottom line: students who aren't prepared for the real world because of inflated grades know less, study less, and make less money—leaving their communities and the nation diminished as a result.