Observe how the students work in real situations. Do not tell the students that you are observing, whether it is in group work or individual assignments, to receive an authentic representation of the students' work and progress. Another suggestion is to ask a student to retell you stories that he has read. You will be able to note if he knows the most important parts of the story, as well as if he is understanding it.
You can assess the development of individuals and the group as a whole through some activities. Form literature circles, where a student can discuss a particular book that the group have all read. Pose questions for a student to answer in small groups and to share with the group at large. Before reading a particular book, engage in prereading activities, such as making predictions about the book based off of historical context or assessing prior knowledge about the situation.
Use a rubric to assess a student's response to a piece of literature or a creative piece of writing that the student has produced. Doing so will allow the student to see how individual categories affect her grade as a whole. Assign a separate score, from one to five for example, for content, grammar and organization. You could tally all of the scores up for a total score or simply allow the student to see her score in each area.
Conduct interviews with each student to learn about her strengths and weaknesses. You might ask her what his favorite novel or story was, or which piece of reading material she struggled with the most. Another option is to pass out self evaluation surveys. You could ask the same types of questions as in the interview. Additionally, you could also ask a student to write what grade she thinks she deserve in the course and why she thinks she deserves it.