Originally Posted by Bostonian
Students, including Harvard students, need realistic feedback about their abilities and the quality of work they have done, and grade inflation impedes this. According to http://www.gradeinflation.com/ , there has been more grade inflation at private than public colleges.
Thank you for posting this. This dovetails with a bit o' research I found while considering an aspect of the OP's question on a related thread.

Reading from How College Affects Students, Vol 2, A Third Decade of Research, Pascarella & Terenzini, 2005, page 76:
Quote
Our 1991 synthesis found little consistent evidence indicating that measures of institutional quality or environmental characteristics had more than small, and generally trivial, net influences on how much a student learns during college. When pre-college traits were controlled statistically...
and page 77:
Quote
We uncovered 10 studies based on three independent samples that investigated the impact of college selectivity on various standardized measures of academic achievement. Consistent with our 1991 synthesis, the weight of evidence from these studies provides little support for the premise that attendance at a selective institution has a consistent and substantial positive influence on how much one learns - at least as measured by standardized tests...
GRE may be the standard test referred to as it is referenced several times in that chapter, beginning on page 65. Buy the book, it is a fascinating and multi-faceted compendium of studies.

What is revealed by this research seems to give rise to the "Colleges That Change Lives" movement (published 1996, revised 2000) and the plethora of college rankings including U.S. News, Forbes... encouraging students, parents, high school guidance counselors, and prospective employers to seek out and acknowledge quality everywhere, not regard the ivies as the last bastion of higher education.