I have no doubt that this is more urban myth than real history. If for no other reason than all the students who studied hard and didnt get A’s would go to the dean and complain and this little experiment would be over. Even though there is a huge error rate, schools still attempt to use grades to denote how well students understood the material, not as a reward for studying.
Fun thought experiment though. The problem here is the assumption that the students are lazy and have NO natual aptitude for the material. I had plenty of classes where I really enjoyed the material and have kept up with it afterwards just for my own reward. I have known plenty of people who “could just play”, to borrow a phrase, no matter how little they studied. So the lesson then would be that Socialism could work with the right sinario/setup?