I'm going to offer an alternative possibility (not to discount what other people have been suggested, but because I see another possible answer).
I have come across a lot of people in my life, including the chunk of my life that I spent teaching in universities, and the larger chunk I've spent teaching in dojos, who just don't know how to study. If they reach adulthood with that lack of knowledge still there, it becomes something of a phobia - they firmly believe that they cannot study, cannot learn, cannot pass exams. So they deal with it by not trying.
So, I'm going to suggest that perhaps it's not threats of a stop in flying, or a good kick up the backside that are needed. Maybe what they need is help with *how* to learn groundschool material.
There are various strategies of-course, but all of those strategies require structured working, active (writing / practicing) learning. Left to their own devices many students (particularly anybody under 30 these days, or at the other end those just a long way from any formal education) will default to simply trying to read the material, which seldom works for anybody. Possibly if you can show the student that this learning process is not too unpleasant an occupation, and importantly that it works and he'll pass and then get on with the fun stuff, you'll sort things out.
And if that doesn't do it, also just ask him the straight question as to whether he's planning to get the licence, or is just happy to fly dual or supervised solo, and paying for your time, indefinitely. If the second, enjoy the flying and the money - and stop worrying about him (whilst obviously keeping the door open when he realises that flying for yourself is a lot more fun.)
G