bad choices by the kid. everyone does them, it is what you do to overcome them that makes you. how she was raised has no bearing on the issue. she shouldn’t hold it against her neice that she made a bad choice, but also she should do minimal financial support for her.
the neice needs to figure out what she can do to ‘fix’ it. the old adage that you made your bed, now lie in it applies here. i.e. get a job to pay for baby, does she want the bf in the baby’s life (perm?), if not, she need to ensure she has child support payments coming in for the baby’s support.
she needs to go to school, find cheap daycare, the friend should support her neice who made the bad choice emotionally, but not enable her. she can tell or show her where the financial support is to get her back on track, but that is it. she need to be there when the going gets really tough for a shoulder to cry on (or babysit once in a while – not on a regular basis).