The thesis that low grades cause college students to give up receives some support from early psychological research and from current reinforcement theories. This study investigates the effects on subsequent grades of low, average, and high first-exam grades for 192 students in a traditional grading system and 52 students in a pass-fail grading system. When regression effects were eliminated, it was found that students receiving D's and F's dropped out significantly more than other students, but low-graded students who continued the course did better on a later exam. Relative to others, students receiving A's on the first exam did significantly better on a second exam. Students in the pass-fail system did not show any significant effects from first exam grades, but overall they received significantly lower grades than those on the traditional grading system. The results, though inconclusive, support grading systems that minimize low grades and maximize high grades. (Author/AF)