Higher education instructors are increasingly replacing blanket artificial intelligence bans with structured, student-led engagement frameworks. This pedagogical shift recognizes that generative AI has fundamentally altered academic workflows, prompting educators to adapt instructional strategies rather than enforce prohibitive policies. The transition was driven by a recent case involving a university computer science professor who abandoned a strict no-AI mandate following a direct discussion with an undergraduate student. The student openly acknowledged using AI to complete a final report, expressing anxiety about the technology necessity for his future career while lacking clarity on institutional guidelines. Recognizing the disconnect between his professional use of AI tools and his classroom restrictions, the instructor initiated a collaborative policy revision. Instead of imposing top-down regulations, he facilitated a classroom-wide negotiation process to draft an AI usage contract. This framework clearly delineates acceptable applications, permitting students to automate repetitive tasks and conduct literature searches, while reserving system architecture, design, and critical analysis for human oversight. The approach transforms students from policy subjects into active partners in academic integrity. Alongside the contractual agreement, assessment methodologies were revised to counteract the volume-driven output typical of AI-generated content. Written assignments were capped at two pages, and grading weight was shifted toward oral defenses and structured discussions. These modifications compel students to synthesize complex information and defend their reasoning verbally, effectively probing their underlying thought processes. Early implementation across multiple semesters has demonstrated measurable benefits. The collaborative contract serves as a consistent icebreaker, fostering a transparent classroom environment. Furthermore, the condensed writing requirements and oral assessments have strengthened student argumentation skills and deepened analytical engagement, proving that pedagogical adaptation remains more effective than restrictive bans. As generative AI continues to reshape knowledge work, the emerging consensus among forward-thinking educators emphasizes integration over prohibition. By establishing clear boundaries that prioritize human critical thinking and adjusting evaluation metrics accordingly, academic programs can preserve educational rigor while preparing students for an AI-integrated professional landscape.