The school then has to choose to either fail the student or ignore their cheating. With a $250k incentive to choose the former, that's what they choose.
The financial pressure to ignore their cheating makes sense to me, but it's not clear to me how that's related to language skills.
These US schools are teaching classes only in English, so the students' inability to speak, write, and (in some cases) read English means that they can't do the work.
I've observed them brazenly cheating during tests by looking at other students' papers, but I think it's more common to hire English speakers who know Chinese to do the work for them. They fail some tests, sure, but they end up with C's overall and a diploma to take home.
I actually had a classmate in college who ended up founding a successful business that exclusive connects American speakers of Chinese with wealthy students from China to write their essays and do their homework.
It's a scam on both sides and it devalues the degrees.
Failing someone on the grounds of cheating at the university where I attended was a huge time investment. If the student contested their failing grade, the professor/lecturer who was the accuser had to go with evidence and present it before an internal panel. The student would obviously be allowed to defend themselves.
The outcome of the panel would rarely be in the favor of the accuser and against the student. The student would have to have been accused multiple times before the panel would take the complaint seriously. The punishment would end up being something like turning the failing grade into just one grade above failing.
When you consider how much a lecture gets paid, and how little importance teaching is given for researchers, you begin to understand why lecturers/professors just hand out Ds and move on with their lives.
The amount of times I caught people with MOSS[1] was too damn high. Never had anything come out of it so I stopped going the extra mile past sending the results to the person teaching the course.
Initially it posed quite a dilemma for her since she had the power to give zeros for cheating, we determined the best course of action is to forward the evidence to the professor and forget about it.
Isn't the former exactly what they should be choosing?
As for what they "should" be choosing, I think the article hits on it: they should be running leaner operations that can survive without what is essentially a large scale diploma fraud operation, in which both the schools and foreign students are complicit.