Student grades are down and failures are rising at the University of Maryland. But far from seeing this new trend as a problem, faculty members - and even some students - speak of it as a positive sign.

"Nobody likes it to happen to their own grades," said Mark Holt, managing editor of the Diamondback, the College Park campus newspaper. "But in the sense that people like to have some self-respect and they want to go to a university that's respected, [the stiffer grading] is a good thing. For the people who don't get squeezed out, it's very helpful."

"For a time, the grades went up as a reaction to the Vietnam war and that period of student activism," said university chancellor Robert L. Gluckstern. "Now there's a general recognition that grade inflation is a problem.... There ought to be a strong correlation between performance and the reward for it. I think we're moving in the right direction."

Since the spring of 1976 when it reached a peak, the overall grade-point average of Maryland undergraduates has dropped from 2.82 to 2.67 on a 4-point scale, according to the university's data research center. The number of failing grades has risen by more than a third, to 7,860, this past spring.

At American University, where officials seem to take pride in lower grades, the proportion of A's has dropped from 34 percent of all grades in the fall on 1974 to 26 percent last fall. Meanwhile, the proportion of failing marks climbed from 1.7 percent to 4.6 percent.

"There has been a deliberate policy here to take a good look at grades and make them mean more," said Frank Turaj, dean of American's college of arts and sciences. "It's all a matter of consciousness-raising and jawboning, but I think it's had an effect. We've tried to make it clear that A should be excellent work, not just pretty good."

At other colleges the pattern of changing grades is less clear. Although grades no longer are climbing as sharply as in the late 1960s and early 1970s, there is no evidence of a widespread decline from the high levels to which they rose.

"I think we've reached a plateau," said Arvo Juola, a professor at Michigan State University who first documented the scope of grade inflation in a nationwide survey in 1974. "Maybe there's been a slight droup," he added, "but nothing drastic."

Juola said he is conducting a new survey of college grades, which he hopes to complete by late summer.

In the Washington area, Howard and Catholic universities have had a slight drop in average grades during the past three years; at George Washington there's been almost no overall change since 1974.

The grade-point average at George Mason University declined in 1977 and 1978 but rose slightly this past academic year to the highest level ever - 2.81, about a B-.

(The standard grade-point scale goes from 4.0 for A, 3.0 for B, 2.0 for C, 1.0 for D, to 0 for E.)

At Georgetown University the cumulative grade-point average of graduating seniors dipped slightly this spring after rising for a decade.

"Yes, grades are leveling off," said Georgetown registrar John Quinn. "How high up can you go?"

"It used to be that C was an average grade," Quinn continued. "Now B is the average grade and there aren't too many C's around. It's a puzzle.... I think the quality of students at Georgetown has gone up over the last 10 years, but whether it's gone up as much as the grades, I'm not so sure."

Meanwhile, the increase in grades in the nation's high schools appears to continue unabated. A national survey shows that 23.3 percent of last fall's entering college freshmen reported earning an A average in high school, compared to 19.7 percent in 1977 and 12.5 percent in 1969. Students with C averages in high schools accounted for only 17.6 percent of last fall's college freshmen, compared to 32.5 percent in 1969, when the proportion of high school graduates going to college was much smaller.

"When these grade increases are considered in light of declining scores on college admissions tests, it seems clear that the secondary schools' grading standards have been steadily declining since the late 1960s," said Alexander Astin, a professor at the University of California, Los Angeles, who directed the survey that included about 290,000 students.

Even though the survey does not cover college grades, Astin said reports he has seen from colleges around the country indicate only a slight decline in grade inflation.

He said there are two powerful pressures to keep grades high: concern about losing enrollment and possibly teaching jobs at a time when budgets and the job market are tight, and the widespread practice of student evaluation of professors.

Despite these pressures, American University is "deliberately, very deliberately following a policy of increasing our academic rigor," said Donald Triezenberg, special assistant for academic affairs to president Joseph Sisco.

"The public universities are going to make it no matter what," said Triezenberg, "but only those private universities that are demonstrably good are going to survive. That's the gamble we're taking - in admissions standards, in course requirements, and in grades."

"I'm proud of the change in the trend in grades," Triezenberg added. "I think students appreciate it. What's the point of getting an A if everybody in the class in getting an A? Students aren't dumb."

Even though grades generally have gone down at American, there is considerable variation among different departments. Those with the highest grades last fall were physical education, education, performing arts and foreign languages. The lowest averages were in science and business, with history and literature also grading low.

At George Washington and Maryland, history and literature were about in the middle of the grade distribution, but the other high and low fields were the same at American University.

Grades at the University of Virginia remain as high as the mid-1970s, but the faculty there responded to grade inflation by sharply raising the requirement to get on the dean's list. As a result, the list has shrunk from almost 58 percent of students in 1977 to just 30 percent last year, about what it was in the mid-1960s.

"Making it tougher to get on the dean's list is a lot easier to do than actually pushing grades down again," said George Weber, an education consultant. "To the extent people look at honors - and they do for getting into graduate school - that sort of change is effective."