Well, you can give them a "Pass" or "withdraw" with the option of going on to the next class, or taking it again (for no charge). That may be the best compromise.
A withdraw means they still have to pay for the course and given that student loan debt is largely not dischargeable in bankruptcy I won’t ask them to withdraw. My college has not gone with the option of pass/fail. I’m giving all of my students a grade and no grade will be lower than a C this semester. I don’t have the ability to let someone take a course without paying for it.