Consider two students, both of whom are enrolled in a college class.
Both students fall woefully behind in their course work, to the point where their ability to pass is in Serious Jeopardy. And the day is the date of Last Drop and they both need to turn in a major paper, which they've had no time to complete.
Student A makes the painful decision to W the class rather than take the GPA hit. The next semester, Student A must retake the course but does so completely out-of-pocket. For Student A's financial aid is cut because Student A is no longer considered a full-time student.
Student B, believing the professor to be a short-sighted incompetent boob, copies a paper off the Internet and turns it in. But alas for Student B! The plagiarism is caught, and is so blatant and egregious (after multiple litanies to the class about the very thing) that the instructor has no choice but to record a course grade of F and deny the student access to the course for the rest of the semester. The next semester, Student B will retake the course as well, but will be given financial aid to do so. For Student B maintains a full-time load and is considered a full-time student.
What's wrong with this picture? Student A is penalized for doing right, and Student B is being incentivized to cheat. Most student grants specify completion hours, and a grade of F indicates a completed course, regardless of circumstance. Some colleges (my own included do have a grade of FX, indicating a student who quit attending after the date of withdrawal and who will be denied financial aid in the future (obviously the student was trying to game the system...) But they are not the majority. And colleges have no incentive beyond their reputations to challenge the system, as government funding is based on completion rates.
If you incentivize a behavior, expect more of it. My students don't even bother to try to deny cheating any more, they just try to give justifications and then beg to be allowed to stay in class: I can't afford to drop the course. Sadly, I think I hurt them more by saving their GPA with a Withdrawn than by giving the used-to-be-shameful grade of F.