GCSE and A-level students will be given grades based on teacher assessments and their work so far, the government has announced.
But students will also be given the opportunity to sit an exam in the autumn if they wish.
Exam boards will now work with teachers to come up with a “calculated grade” to give to those affected.
The government is aiming to provide these grades to students in England by the end of July.
Already some universities have begun changing offers to students from conditional to unconditional after the exams were cancelled.
And now teachers will be asked to submit judgments about the grades they think their pupils would have received if exams had taken place.
Staff are expected to take into account a range of evidence and data – including mock exam results and other school work – in these judgements.
This will be combined with the pupils’ previous attainment to calculate their grades, the Department for Education (DfE) has said.
Students will be able to appeal if they are not satisfied that their calculated grade reflects their performance and they can also choose to sit exams once schools reopen or in summer 2021.
Gavin Williamson, the education secretary, said: “I have asked exam boards to work closely with the teachers who know their pupils best to ensure their hard work and dedication is rewarded and fairly recognised.”
The DfE said this year’s grades will be “indistinguishable from those provided in other years” and would aim to ensure that the distribution of grades follows a similar pattern to previous years so affected students do not face a “systematic disadvantage”.
Mr Williamson added: “My priority now is to ensure no young person faces a barrier when it comes to moving onto the next stage of their lives – whether that’s further or higher education, an apprenticeship or a job.”
The announcement came after A-level students said they felt anxious about whether they would be able to progress into higher education.
It is still unclear how degree places will be allocated now that exams have been cancelled.
But some universities, such as Cardiff Met, York St John and Liverpool Hope, have already taken the decision to disregard A-level grades.
Most UK students who applied to these universities have been told that their offers are now unconditional due to the circumstances.
The heads of the Russell Group, GuildHE, MillionPlus and University Alliance have said universities will support students by being “flexible” in their admissions processes.
The joint statement from the organisations said: “We want to reassure students who have applied to university, or are thinking of doing so through clearing, that every effort will be made to ensure they are not disadvantaged in any way by the decision not to go ahead with exams this summer.”
But Nicola Dandridge, chief executive of the Office for Students, has urged all universities to “pause unconditional offers” as she said there is “no reason” to depart from the normal admissions processes.
On the exam grading, Geoff Barton, general secretary of the Association of School and College Leaders (ASCL), said the newly announced system “leaves many questions unanswered and will clearly require more detail”.
But he added that he was confident that all the relevant parties “will do everything possible to ensure grades are awarded fairly and consistently in these difficult circumstances”.
A statement from exams regulator Ofqual said: “We are working tirelessly to support students affected by these unprecedented and difficult circumstances and to develop, quickly, a fair and consistent process.
“We know that schools and colleges urgently need to know what they will need to do, and when.
“Work is already underway with exam boards and teachers’ representatives to develop our proposals and we will provide more detail in the coming days.”
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