I'm sure that was the hope. Holt's opinion was that grading (mere grading-- the school didn't use humiliation or corporal punishment) was enough to crank up their anxiety so far that they weren't paying attention to anything else.

Here's another clue about grades. I took a college level Alexander Technique course where the students were graded on attendance. Alexander Technique is a way of releasing habitual tension [1] so as to be able to move more efficiently.

The teacher said he'd found that if students were being graded on their ability to not pull their heads down and back, there was just no hope-- they'd go into the pattern of tension. Since he had faith in his ability to teach anyone who showed up, he graded on attendance. He mentioned another teacher who graded on quality of class notes.

My hypothesis is that someone who'd absorbed Alexander Technique very deeply would be able to be graded on it without pulling themselves down-- in general, Alexander Technique is about not having that habitual response to a stimulus-- but it's too much to learn in a semester.

[1] Tension isn't a static thing-- it's frequently a habitual response to a stimulus, including much milder stimuli like getting out of a chair or starting to speak.