I know what the rules are, but no one knows how anyone applies them. Because each school is in charge of its own curriculum, each school gets to decide what it means for someone to qualify and therefore be retained. Because of privacy laws, we'll never know how this rule works.
The rule sucks because it prevents kids from getting an education. Now, it's hard to make that point since playing NCAA basketball also makes it very difficult to get an education, so it may be moronic to blame the rule. Nonetheless, playing basketball (and 40 games) is different from codifying a statistic which encourages schools to make a mockery of attaining a degree. This means that while college basketball may be hypocritical and problematic, it's not an outright sham.
Again, the NCAA wants this sham to continue. I saw Derrick Z. Jackson of the Boston Globe (one of the chief NCAA critics when it comes to education) fall hook, line and sinker this year for APR and GSR. If the NCAA really wanted to do something about academics, they'd create some admission standards (very low), they'd reduce the number of games (and travel), they'd guarantee scholarships for 4 years and penalize schools with one and dones by allowing schools to renew scholarships only once every two years (i.e. if a player leaves, you have to wait a year to give it to someone else), and then you'd stop worrying about academics and leave it up to the schools.
At many state universities with working student populations (even at AAU schools), the grad rate for regular students is low after 4 years. At my school it's around 50%. But after 5 years it jumps to 67% and then after 6 years it is 80% for incoming freshman. It makes no sense, in an era when we offer fewer classes than ever before and therefore make it difficult to graduate on time, to hold student athletes accountable for graduating in 4 years. BBall players should only take 2 classes tops in the Spring. Football players the same in the fall.