I personally don't like the idea of people cheating like this in an academic setting, but reporting them is a very serious undertaking with a potential to damage lives and should be considered carefully. I suggest that you proceed through this sequence of questions to help determine if you should report them or not:
1) Is the person who is helping really your friend? If so, don’t report them out of loyalty to your friend. Most likely you only know about this because your friend told you, or the other person told you because he knows that you are a friend of the person who is helping him cheat. I feel that your loyalty to your friend is a higher obligation than reporting them. Of course, it’s OK to talk with your friend and tell your friend that you disapprove, or possibly even break off the friendship if you disapprove of this behavior strongly enough. Obviously if your friend was involved in a more serious crime then your duty to your friend would not necessarily be your highest obligation.
2) On a spectrum of “bad things” this is fairly minor. Have you ever done anything that is this bad or worse than this? Would you have wanted to have someone report you for that behavior and face the consequences? You are in a position to help guide both of these people to a better path of behavior and you can potentially do so without reporting them.
3) Do either of these people know anything about you that could put you in a bad light if it was revealed? You should consider that they will probably know that you were the one that reported you and if they know something bad about you, they might reveal that information after they figure out that you were the one who reported them. Although this might seem like item two above, it is not. Item two was concerned about your behavior, regardless of if anyone knew about it or not. This is concerned with protecting yourself from harm by one of the people that you report.
4) Are you in academia? If so, you would probably feel a higher obligation to report it and that would be understandable.
5) Why do you want to report them? You said “I just hate the idea of someone bragging about being in an Ivy League graduate just to pay someone else to do his work.” That sounds like you are resentful that this person is going to get an Ivy League degree. Did you want to get an Ivy League degree and you were unable to for some reason? If not, what is your reason for wanting to report them?
6) What do you want to accomplish by reporting them? Is it just to satisfy a moral duty that you feel that you should report them, or are you wanting to see the person removed from the program or some other punishment?
After having been out of school for a long time, I have adopted the philosophy that the real world is an open book test. For most things in life, it doesn’t matter if you know how to do things, or you know how to get things done (by yourself or others), as long as you can produce the results in the end. This person could end up being a dismal failure, or he could end up running a company one day. In the real world, knowing how to get a good or great result is what matters. Also, a person who bends the rules like this might be more likely to bend the rules in the future about more important things, but there’s no way to know if that will happen or not. I don’t like the idea of people cheating in a program like this because it is an academic setting, and the rules there are different than the rules in the real world, but I don’t see that this situation rises to the level that you should report it.