Tracy, there is probably no topic in education on which there is less consensus than the issue of whether a child will benefit more from being held back or being sent along with peers in spite of not having achieved the objectives of a particular grade level. Not only are opinions divergent; research findings on the issue are inconsistent.
Furthermore, an alternative that has been proposed—extending the school year through the summer for children who need more time to learn the curriculum—has never found much favor in America. One reason is that the very children most in need of extra time are the very ones who most resist continuous schooling and who want the summer months to be school-free.
I agree with the district manager who said that special ed needs don't go away. So I would send your daughter on to the next grade and make certain that she has extra help. With six children and another on the way, you can't have too much time to help her at home. Perhaps the older children can help supervise her homework or do other things with her, such as reading to her and playing math games.
I think that I would talk to her teacher or the principal of her school about why your daughter is lagging behind. With an IQ of 110 it can't be explained as a general developmental delay. There must be some reason, perhaps emotional, why she isn't keeping up with her peers. Maybe she's just lost in the middle of the family and doesn't get her share of stimulation and love. Since she loves to be outside, I would make certain she has plenty of opportunity to gain skill in a sport she likes. And don't forget to praise her for those wonderful qualities you mention—being thoughtful and loving. In many ways, they're far more important than dazzling academic success.
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