EDGE-OPD: Internalizing Privileged Context with Evidence Guided On-Policy Distillation

Abstract: On-Policy Distillation (OPD) has gained wide attraction as an LLM post-training paradigm due to its effectiveness in improving capabilities without introducing model distribution drift, and consequently, regression in general tasks. On-Policy Self-Distillation (OPSD) is an efficient use-case of OPD, which is appealing as it requires only a single model as a student and teacher, and it also has the benefit of providing privileged context that is a absent at inference time (e.g. a persona, a private fact, or a worked solution) to the teacher during the training process. The challenge in this approach is that the privileged information can change model behavior more than intended: it can modify reasoning, degrade general capabilities, and affect performance indicators like response length, style, or local token preferences. Consequently, OPSD may train the student on side effects rather than a desired, transferable behavior. In this paper, we study this problem in a rare-token/identity setting and propose EviDence GuidEd On-Policy Distillation (EDGE-OPD), a modification of OPSD with two distinct characteristics: a) it uses guided rollouts to inject privileged-context behavior to the student at sampling time, so that the rare target behavior is actually present in the on-policy data, and b) it applies an evidence mask: the student is updated only at token positions where the privileged context supports the sampled token, rather than on every token in the rollout. We empirically show that OPSD (and its variant RLSD, with and without a verifier) completely fail to learn a target identity, while the integration of guided rollouts allows them to succeed. Additionally, mask-region ablations show that the persona signal is localized to the positive-evidence tail, allows us to draw valuable insights about efficient knowledge transfer and preservation of general purpose capabilities.