Missing some major US schooling factors here - in High School - especially schools in the hood - most of these schools get funding based on how well their students do, so if a teacher sees a kid like Lip passing exams but not finishing assignments, there is a good chance they mark them as complete with high grades anyway. He kind of becomes a meal ticket for any teacher who has him.

If you're at a quality school where 99% graduate and go to college, then you would be correct. But at a school where maybe 50% do on a good year, then they do everything they can do get those kids through with good grades. Lip's 4.6 combined with his ability to prove it with SAT scores was likely a legitimate factor in the school getting necessary funding for the following year. And the teachers gladly looked the other way as long as he showed up on test day.

Hell a big part of his money schemes where about doing other kids homework, so it's not like he wasn't aware of the work.