I have had a similar situation occur with a friend of mine as well.
Unfortunately, there wasn't a whole lot I could do to help him. Several years ago, when Final Fantasy XI was released, I dove into it because I was a final fantasy nut. It was a fun game, and I played it a lot, but I always got all my schoolwork done, and never missed a class because of it or anything like that. I put in about 120 days of playtime in about 2 years. That's a lot of playtime, I thought, this is not good. I should quit so I can spend that time doing something more beneficial to myself. So I did.
Well, in the meantime, my roommate was going through some tough times, was on welfare, smoking too much pot, had some serious depression problems, and didn't have the motivation to find a job, because by some miracle he was able to live on $550/month (seriously, it was amazing, he always paid his rent on time, and only occasionally got help from his family). Him and a friend of mine ended up getting him into FF XI. Seemed harmless enough at the time, but he has an addictive personality and he was hooked badly. I think he put in over 700 days of playtime in the 3 years that he was playing while he was my roommate.
Now, I owned the house, and eventually decided that I wanted the upper floor to myself, and no longer wanted a roommate because I no longer required it in order to maintain my financial comfort. The arrangement that kept him living at my place was that he only had to pay rent. Phone, cable, internet etc I paid for as long as he mowed the lawn, took garbage out and did some other chores around the house. This was very convenient for him. When I had to kick him out, (which was a very difficult thing to do, btw) he had no other choice but to quit smoking pot and find a job. Turns out I was a bit of an enabler. My friends and I were all very concerned about how it would turn out... my fear was that he would not be able to find a place to live and I would start seeing him begging for money on a street corner somewhere. Fortunately this was not the case.
Fact is, when someone realizes how screwed they are, they usually smarten up. My only advice is to take away anything you can from him that is enabling him. Where is he getting money from? If it's his parents, it's time for you and his parents to have a serious talk about his problem. Is there a convenient living situation for him that you can take away from him, disguising it as a move for your own personal preference? If you haven't already, then it might be a good idea to show him the reality of his situation, what he's doing to himself, like... how badly he's screwing himself. Make note of things like... what your salary will be when you get out of school and start working. Be a jerk if you have to... make fun of him about the fact that he's going to be living in his mom's basement, single, alone and a loser for the rest of his life. Perhaps an intervention of some kind is in order?
It's all easier said than done, of course. But the other option is for him to hit rock bottom on his own, the only way he'll stop is if he can't afford to pay the bills anymore, or his computer dies and he can't afford to fix it. At that point it would be a good thing if his parents know that he's no longer using his computer for school, so they won't bail him out.