This study examined how secondary institutions define and implement institutional academic standards and progress requirements for federal financial aid recipients and how the federal requirements for academic progress affect the distribution of grades at these institutions. The study used a mail survey of a nationally representative sample of 200 two-year and four-year postsecondary institutions, and case studies of a sample of six four-year and 3 three-year institutions. The study found that the federal requirement that students receiving federal student financial assistance show a cumulative C average by the end of the second academic year has had little impact on the definition or implementation of academic standards, on aid recipients themselves, or on grades or grading practices at either type of institution. The study also found that most institutions maintain minimal academic standards consistent with or more exacting than the C average by the end of the second year, that enactment of the federal regulations has had no grade inflation impact, and that 86 percent of institutions would not change the requirements if they could. Appendixes contain information on methodology and a copy of the survey questionnaire. (JB)