I do think it is worth drawing a distinction between college and K-12 though. In college students are there by their own choice, and colleges choose who they ad

I do think it is worth drawing a distinction between college and K-12 though. In college students are there by their own choice, and colleges choose who they admit, and if students are paid when they succeed on tests they have a strong and immediate incentive that doesn't exist for them in K-12. There is no necessary reason that tests have to be on a strict time schedule. Imagine instead that testing is offered continuously throughout the year, and a small fee is collected from both the school and the student for taking the test, which is refunded along with the payout if the student succeeds. Then there would be a reason to avoid taking testing before the student has a good handle on the material. I think that testing serves different functions depending on the context, the binary signal of whether someone has a degree or not from some random university doesn't really measure deep understanding either. It makes sense for a teacher to measure the fined-grained understanding of their students it order to figure out what they most need help with, but maybe it is less important for determining when their level of skill and knowledge is above the threshold where they should be given a degree or credential.