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The other problem with the "we need to fix the system" arguments is that they often ignore the much greater problems in our society.

Our schools, in the aggregate, aren't that bad. We have a broad spectrum and inequality is severe, but even in the worst-off areas, it's not the schools so much as broader social conditions that are producing lousy academic performance. If kids are getting evicted, they're not going to be able to turn homework in on time. If they're doing nothing all summer, they're going to backslide. I also question the social value of "fun" projects like dioramas in grade school: the result seems to be that middle-class kids' parents do all the work, producing adult-quality work, while the less well-off students turn in projects that looks like they were made by kids.

We have ridiculous rates of cheating because we're in a society run by people who cheated and everyone knows it. Corporates cheat; you can't become (or stay) an executive if you don't lie and backstab your way to the top. The fish is rotting from the head, and young people are extremely alienated. This doesn't justify their actions, at an individual level, but it does explain the upsettingly high rate of dishonesty we're seeing.

People also underestimate the power of peer framing and moral drift. Generally, people don't wake up one day and decide that they want to cheat their way through college like some future insurance executive. It happens over time. They start with minor offenses like lifting a sentence without attribution, or looking up one answer on a phone... but, over time, they're plagiarizing whole papers and have stopped doing the actual work... and this is when they usually get caught.

Dishonesty also goes both ways. Grading might be broken, but a world without it would be worse--removing the SAT enhances the preexisting advantages of the rich. Once people become teenagers and realize that advancement in society isn't only based on merit but also requires playing social/nonacademic games (in high school, to be popular and appear "well-rounded" to admissions committes; in college, to get laid but also to get introduced to the best companies; in the work world, to ingratiate oneself to the right people and thus climb the ranks over more deserving but less likeable peers) at which everyone cheats, because everyone has to do so... because global corporate capitalism is itself a cheating system in which most of us are predestined to lose... it becomes harder to make a moral argument to them that cheating is categorically unacceptable.