Jeffrey T. Denning, Eric R. Eide, Kevin J. Mumford, Richard W. Patterson and Merrill Warnick tell us why: grade inflation:

We document that college completion rates have increased since the 1990s, after declining in the 1970s and 1980s. We find that most of the increase in graduation rates can be explained by grade inflation and that other factors, such as changing student characteristics and institutional resources, play little or no role. This is because GPA strongly predicts graduation, and GPAs have been rising since the 1990s. This finding holds in national survey data and in records from nine large public universities. We also find that at a public liberal arts college grades increased, holding performance on identical exams fixed.

That is from the new American Economic Journal: Applied Economics.  And here are earlier ungated versions.

Keep reading this article on Marginal Revolution.

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