The journal Inside Higher Ed has an article on this very issue. They report the following from the Association of American Colleges and Universities annual meeting:
When organizers of the workshop had audience members describe their experiences with grading, the closest they came to a fan was an associate provost who admitted that he saw grade inflation as completely out of control and said that for more students at his and similar institutions, the grade-point average range is around 3.4 to 3.8. It seemed that everyone else in the room had been motivated to attend by their sense that the system isn’t working.
Top issues for this are similar to what Iowa high schools might experience: grade inflation, grades "squelching intellectual curiosity", grade inconsistency from one class to another, and grades being an overall drain on the positive atmosphere of the class.
One interesting tidbit from Kathleen O'Brien, one of the provosts attending:
One thing holding back colleges from moving was the sense of many people that doing away with grades meant going easy on students. In fact, she said, ending grades can mean much more work for both students and faculty members. Done right, she said, eliminating grades promotes rigor.
And in other news, D'arcy Norman reports on one specific "fringe" professor who unilaterally decided to go gradeless. Norman offers good perspective on the need for mass acceptance, which we are still a ways from:
Isolated professors willing to risk their tenure by experimenting with gradeless classes will be perceived by the public as being “lesser” classes, not up to “the standards” of measurement. When a society only understands assessment of learning in terms of letter grades and curves, anything else is perceived as meaningless liberal garbage. Even if it is actually a profoundly powerful experiment in meaningful teaching and learning.
What is needed is a larger shift away from grades and numerical metrics of assessment. And that kind of change just isn’t possible with a lone professor tilting at that particular windmill. But, maybe, the concept has now gained a bit of public awareness, and subsequent experiments may meet slightly less resistance.
This will be the big challenge for schools, as there is large amounts of inertia from public expectations that the traditional grading system is the only thing possible. The questions to continue to ask: Who do grades serve? Do they help students learn (which is our objective)? Or do they serve to rank and sort, helping other institutions?