This is how it works at most universities it seems.
I think it depends. At least at the major public university I went to grad school at, if an undergrad had pulled that there would have been extremely serious repercussions. Failing the class would have been the minimum. The bigger issue then was that students with money could just buy their papers and take-home work, which was often impossible to catch. This was before LLMs started hurting paper mills' bottom lines, and a lot has changed in the past few years though.
I used to pick up pocket money writing essays for dumb rich kids in college. If I cared, there’s enough of a paper trail to invalidate more than one degree, at least by the written rules. In the real world I doubt that the cheaters would face real consequences, and have concerns that I would lose my own credentials.