I think that a lot of schools/people think that it implies that the student dropped out of school and then got a GED. It implies that they didn't finish, etc. (This is not necessarily my viewpoint)
I don't know about your state laws, but in IL, we determine when the child is graduated and give them a diploma. Of course, there are the state requirements that the student must fulfill.
I agree, I would (if possible) consider him finished and give him a diploma.