So a formal education is supposed to meet two needs: one, to educate the student. For this goal, we don't need to worry about cheating at all.
The second purpose, however, is as a way to signal other people that the student has been educated. This is what a college degree is: a certification that the person has been educated to a particular standard.
For that, we need some way to verify that the person has learned what they were supposed to learn. Tests are a way of doing that, and cheating prevents the ability to measure the success of the education.
It goes even further than your second point, for many professions:
We don't just want to signal other people that doctors, nurses, engineers etc. have been educated. We want to validate that they've actually learned what they need to know in order to not cause uneccessary injuries and death to other people.
The second purpose, however, is as a way to signal other people that the student has been educated. This is what a college degree is: a certification that the person has been educated to a particular standard.
For that, we need some way to verify that the person has learned what they were supposed to learn. Tests are a way of doing that, and cheating prevents the ability to measure the success of the education.