alt Hacker News> This has the knock-on effect that it becomes impossible to excel in your first semester.
No, it eliminates the grade and GPA award for excelling. You can still excel, unless you absolutely require external validation for your work. And even then, it's still college, professors notice top performers even if they aren't giving them an A+++++ and have to give them a Pass instead.
In my opinion you are under-appreciating the external validation. Removing grades disincentives excelling. Why work any harder than getting a "pass"?
At the larger schools (like Michigan), professors (if a professor is actually grading the class, and not an adjunct or grad student) are hardly going to remember individual performances on freshman exams, or even pay much attention.