The challenge I think is that students then struggle because they used AI throughout the semester and didn't actually learn. The proper response would be to be strict and fail students that don't perform to a satisfactory level, but this messes with the funding incentives.

You can only lead a horse to water, you can't make it drink. Maybe a student's sincerity should play a larger role in the admission process, maybe with a sharp expense curve such that students judged to be more sincere have to pay less tuition. It is an inherently subjective evaluation though.

Edit: I completely misread your comment. Asking students to build a model is not a finance class anymore.