Quite a bit.
As a student: Grades are one of the clearest signals on whether you're a good fit for a major or topic you're interested in, you need more work, or you need to trim down the number of classes.
Not providing that clear, cumulative signal is a major disservice to the students.
Also, UofM is expensive so dragging it benefits only the financials for the school.
I think this touches on a real potential harm. I guess my counter is that it'd be hard to make that adjustment after the first semester anyways. Particularly because these will all be intro classes anyways which can all be overly easy. Some of my engineering 3 credit courses really should have been like 6 credits whereas some of my generals 3 credit hours were more like 1 credit. It's hard to know that without getting a feel for the classes and professors.