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Unfortunately grade deflation has little positive impact for the students. Medical and law schools often (typically) don't take grade inflation/deflation from a school into account. And almost no scholarships take this into account. If you do have professional school aspirations, there's very little benefit to being at a school with grade deflation.
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The university I went to basically eliminated "B"s for pre-med and pre-law students, which made most courses effectively pass-fail: If you get an A, you move on, if you get a "C", you're encouraged to find a different career path. IMO, it's a reasonable response to an unreasonable system.

Likewise, they had a system where disciplinary records could be appealed at any time while you were at school, but they only held evidence for a year. So if you get caught drinking underage as a Sophomore, you could appeal as a Senior, argue that since there's no evidence that you committed the act it should be removed from your record, and win. Like the obfuscated pass-fail system, this was basically only for the students trying to get into Med/Law school, and IMO was a kind of underhanded way to working around an unreasonable standard.

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Probably, until it happens everywhere.

My main point was that, at least in their perception, this is something happening at many/most UC campuses

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