AI has a way of exposing people. In this example, students who are there to get a degree from a prestigious institution, rather than to learn, are prone to take perceived shortcuts and proceed to come unstuck when their AI isn't there to do their work for them, such as in an exam.
These people would’ve failed with or without AI.
Not sure what the solution is - there's no possibility of stopping students using AI to complete their homework/assignments etc. But let me flip the question - do they need to be stopped? Why not let them fail at the exam? As long as the exam acts as a filter, their usage of AI to "cheat" their learning is inconsequential to anyone but themselves.