How has he done in previous years? Is all this brand new to this year?
To get help within the district, from the district and at the district's expense, there is a process that needs to be set in motion. You can start the process with a letter requesting testing. First, though, a note or call to the teacher saying something like you've thought over what she's said and you'd like to pursue testing for your son. She might set the process in motion for you or guide you through it. If not, you can do it on your own and you Do the have right to have your son tested and at district expense.
Some other questions that come to mind are - is your son a strong reader? Have any other teachers mentioned possible issues with reading? Some children who read very well yet miss things in their reading as they rush through it or are nervous. Other children miss things because reading is a more laborious task for them and as they labor through the reading they miss things being said.
And - would you consider going in and observing? You have also that right. If you take a seat in the back of the room, the kids including your son quickly forget about you and the normal routine of the class will pick up around you - observing gives you the opportunity to see your son 'in action'. Is he gazing out the window? Is he nervous and glancing around constantly? Does he seem in a world of his own? Or does he drift in and out depending on what's going on in class?
In the meantime, if he's got homework and if he'll let you or someone near to you - I'd suggest going over his homework at night so at least you know that's being done right. Homework usually counts in their grades so if his homework gets done right, it alone can help some to pull up his falling grades.

Thank you for the suggestions so far. I really do appreciate it. I will go check out the other Group for more info.

I appreciate all the links, too. I am at the beginning of whatever is going on and feel so helpless and clueless.

Does the teacher have reading levels that she can share with you? 3rd grade is often a real shock for kids. Suddenly the work takes a leap from learning how to read to reading to learn. If your son is weak in reading, this could be the cause of his withdrawal.

On the other hand, if he's extremely bright, he could be bored.

So I guess I would start with asking the school for more information. If it's not clear, you can ask the school to test for learning disabilities.

Is he distracted in other environments? It's always possible that he has ADD. But it's also possible that he's distracted by changes in his life. Have you recently moved or has he undergone some other changes in his life? Is he being bullied?

There are many possible causes for ADD/ADHD type behavior. Look at this list to see if anything rings a bell. The next step would be to take him to his pediatrician to rule out most of these things.

www.incrediblehorizons.com/mimic-adhd.htm

If he doesn't seem to have any learning disabilities, there's no reason for him to be worried or distracted, and the pediatrician find nothing, then ask for a referral to a pediatric psychiatrist to evaluate for ADD of other conditions.

Hi. I'm not a doctor, but I've got a bright teen with ADHD and LDs, and could write volumes, but I'll try to be brief. I've been involved with parent support groups for many years, and from your description, I'm thinking your son might have the "Inattentive" type of ADHD, and he might have learning disabilities involving reading as well.

Many people don't realize that there are several different types of attention deficits, and they DON'T all involve hyperactivity. The "inattentive" type is characterized more by "daydreaming" and a lack of focus and attention to details than by outward signs of disruptive behavior. www.help4adhd.org is a good site to learn more; if there is a local CHADD chapter where you live, they have excellent parent support group meetings. www.chadd.org

ADHD is a medical condition, and schools can't diagnose it, although they're involved in the process. Doctors usually rule out other possible medical explanations for attention issues first (ie, they do bloodwork for lead exposure) then give parents behavior "rating sheets" that teachers need to fill out.
The data is reviewed, and then a determination is made.

Having said that ADHD is a medical condition which schools can't diagnose, schools ARE the ones who can do comprehensive educational evaluations for suspected learning disabilities, and you should submit a written request to them, so the process can begin asap. There's an official "timeframe" that must be adhered to, after the formal request for evaluation is made. Sites like www.concordspedpac.org and www.wrightslaw.com can show you sample "request letters' and explain more about your rights, types of tests, etc.

I know I'm giving you a lot of info at once, but for future posts, I'd like to invite you to join the Learning and Attention Difficulties Group here at community.greatschools.net/groups/11554, because many more parents will be able to "relate" to what you're going through and advise you.