The issue isn't so much that AI has replaced essay writing. It's that it has the potential to create convincing (but fundamentally nonsensical/illogical) replicas of academic essays, which have the potential to make an already difficult job of assessment even harder (somewhat analogous to the problem of deepfakes).
By the way, I'm currently thinking about writing something on this topic; if anyone has any thoughts please get in touch. Contact info in my profile.
This raises an interesting point, which is that there seems to be a relationship between essay-writing and essay-reading. The students are able to cheat on essay-writing because the school is already cheating on essay-reading.
If we reach a point where essay-writing is unnecessary because it can be done by machine, it's a safe bet that essay-reading will also be done by machine. What will be the point of writing me an essay, if it's just a function of a prompt? Why not just send me the prompt?
Then professors will start to teach and assign the writing of prompts for essay-writing machines. "Write a prompt in less than 25 words that persuades analog31 to approve your project." And someone will come up with a prompt-writing machine, and a prompt-reading machine.
When they pay so little why would a person spend hours reading and analyzing one essay. The bigger issue if the lack of resources devoted to grading and not that the people on the ground are cheating.
edit: I think the commentator's emphasis should be on the lack of resources and not a supposed negligence on the grader's part.
Probably if someone had a dataset of essays large enough, you could do this right now and cause a lot of trouble.
If the student gets the AI to do it, so be it. You'll get useless feedback and then you'll have to sit in a room and do it for real in the final exam - maybe you didn't need the practice, or maybe you'll wish you didn't waste your chances.
At one time, being able to add up long columns of number accurately using only a pencil and paper was a valuable business skill, now not so much.