ur friend is already illegal

and he/she will have a difficult time to change to any other status once and if he/she is allowed to finish school. All your example showed is how lax his/her school is.

The school won't know anything if you choose not to tell them. The problem is with the INS when you need to apply for anything with them.

It is true that not all law breakers will be caught. But whether or not you want to take that risk is entirely up to you.