It's addressed in the episode...
WESLEY: They should've expelled all of us.
PICARD: They very nearly did. Mister Locarno made an impassioned plea for the rest of you. He said that he'd used his influence as squadron leader to convince you to attempt the Kolvoord manoeuvre and then to cover up the truth. He asked to take full responsibility.
Yes, this. I love how many layers there are to make it work from all angles.
It truly was an accident, so no criminal conviction anyway. So Starfleet needs to check THEIR morals, if they'd like to make a difference if someone confesses or not, if they want to expell someone (and therefore make confessions in the future more unlikely).
Also the manoeuvre was "forbidden", but not, like, "criminally" illegal, just Campus rules. And Starfleet is very soft with reckless behaviour if it works out in the end (e.g. Archer stealing that test-ship), so they would have been heroes had the manoeuvre worked.
Also, Geordi found the proof, but Picard leaked it(!) to Wesley in advance. So Wesley lied at first to the investigation, but then technically confessed
before proofs were introduced into the process.
Also you'd expect a Starfleet officer to never lie. But they were also still in training, and now under immense personal pressure, so you cannot expect them to behave like perfect senior officers already in all situations.
But also they were all grade A students, so expelling them all, even after confessions, would also look negative for the Academy.
And then it STILL all came down to Locarno's plea confession, not just taking full responsibility, but completely, utterly sacrificing himself, taking all the blame & confessing to probably more pressure and blackmailing the others than he actually did.
Like if any single one of these events went differently, everyone would have been expelled, and rightly so.
But as is, everybody essentially knows what happened, but cannot prove it. So Locarno's confession-version of the events, with him the sole badguy & the rest coming around, in time, and on their own, is the official "result" of the investigation and what the Academy has to base their verdict on.
It's a fantastic episode, how much stuff is in such short 45 minutes. And it's truly "morally gray" behaviour, not black or white.
Truly ridiculously remarkable television.
Also... I'm still salty Nick Locarno wasn't on VOY...