(For anyone else who wants to check this, this setting is on Site administration -> Plugins -> Activity modules -> Quiz, setting Auto-save delay at the bottom of the page. The default value is 1 minute.)
At the Open University, we have it set to 30 Seconds.
There is not a clear reason why. Clearly, the shorter the better when it comes to students not losing word, but if it is too short, it might overload the server. The history here is a bit shameful. Until a few months ago, we had this set to 5 minutes. That's what we set when the feature first became available (I guess we did not want to take chances with the server load). The plan was always monitor server load, and gradually reduce it, but we forgot all about that. Then we suddenly remembered, and jumped down to 30 seconds.
When we were experimenting with online exams, we set it to 10 seconds on that system, and there were no issues.
Thanks for asking this question. I will be really interested to see what settings other people use.