Failing a belt test is always a great disappointment, both to the student who failed, as well as to the instructor (I've been on both sides, and even recently as a student). How well the student and teacher recovers from such disappointment (believe me, it IS a depressing thing, indeed, on both sides), depends on the strength and experience of the people involved. It's not entirely unusual to see a beginner / intermediate student, who failed a test, quit entirely. Many times, they're simply not experienced enough (both in and out of the classroom) to deal with such failures, and let their feelings of depression get the better of them. While some folks may discard such students and say "well, they would have been weeded out anyways," and while I may somewhat agree with that statement, I still believe that there are those who simply needed more development, and could have easily passed the retaking of the test in the future, and could have become excellent martial artists in due time. To casually throw away diamonds in the rough might not be the best idea, IMHO. Failing a student at a low rank is very likely to cause quitting, while those who are more advanced, and have seen such things in the past, seem to be less likely to quit. Usually, this predicament is avoided by not letting the student test until the instructor deems that he is ready to do so, but even then, we're all only human, and mistakes can occur. Failing an advanced student shouldn't cause quitting, assuming that the student is sufficiently mature to handle such things, and that he is willing to try even harder the next time. At this point, I would have to agree, that it's up to the student to pick himself up, and rebuild (of course, with encouragement from the teacher).