I imagine it must be very difficult and frustrating to see your niece struggling with little support from her mother. I am glad to hear that she has a loving and committed aunt to help because it does sound as though your niece needs someone to advocate for her.
 
I would again talk with her mother about your niece and explain to her that children who are "held back" tend to do less well compared to their peers who have similar difficulties, but are promoted the next grade. Just holding a child back has not been found to be helpful; targeted interventions that address the child's difficulties are best.
 
I suspect that your niece may have some kind of learning difficulty that is getting in her way. Let her mother know that there are free services available for students who have learning difficulties, but the child typically needs to be evaluated to determine what the exact issue is. That way, specific interventions can be developed to help her. For instance, if your niece has reading comprehension difficulties, testing would be conducted, and an intervention would be developed to boost her comprehension.
 
It is understandable that she would be concerned about her privacy, but school personnel who deal with children with special needs are very careful about confidentiality. And, more importantly, school doesn't have to be so difficult for your niece, and it is important that she continues to like and enjoy school. School personnel can help to make school a more enjoyable experience for her.
 
For more on helping on learning difficulties, take a look at the following section of this site: http://www.education.com/special-edition/learning-disabilities-rti/
 
Best wishes,
 
L. Compian, Ph.D.
Child Psychologist
Education.com