I was wondering how do I make a graduation cap out of fondant?

do you mean just the flat part on top or the whole cap?

Perhaps you could mold a sheet of fondant around a the outside of a small bowl. Trim it nice and let it stay on until it dries a day or two. The square part could just be a square of fondant with a little tylose added for hardness.

I'd do it the same was as mmdeiz10 does.