A new Australian survey found that AI is generating significant anxiety among students, driven less by the tools themselves and more by how institutions respond to AI in assessments. Students reported fears including being accused of cheating despite doing nothing wrong, privacy breaches, and unfair competition for grades. Even as concerns mount, uptake remains high: 84% of Australian students said they use AI tools at least occasionally, up from 74% a year earlier. The findings also cite sector experiences where genuine work was flagged as likely AI-generated, triggering misconduct referrals. For campus leaders, the signal is clear: AI policy, review procedures, and evidence standards are directly shaping student well-being, not just academic integrity outcomes.