The law is called the Family Education Rights and privacy Act or FERPA
and is a federal law. According to a case that was heard in 10th Circuit
Court of Appeals it is illegal to have students grade other students
work. While it has not been the subject of a court case yet it is
probably illegal for parent volunteers to grade tests/papers or to allow
anyone to see other students' grades in any form including posting. Even
if you post grades with a code (student id, a number you assign), it
still is not legal (because someone else could get hold of the code
illegally) According to Southwestern University posting grades even with
written consent is illegal, because someone could be pressured into
signing the consent by other students. At least that is what they told
students, who complained about grades not being posted.
Basically the law says that schools may not release any information
about a student to anyone outside of the school, the student, and the
student's parents/guardians (if under 18) without written permission).
The only exceptions are transferring records to new schools and or
Currently there is only the judgment in the 10th Circuit Court of
Appeals, other circuits may not have heard a similar case or may have
decided differently. Until the Supreme Court Rules (or chooses not to
rule), the issue is still undecided.