Where did you "hear" that--from your brother's friend's housekeeper's daughter's teacher's father's pool boy?
Yes, AdSense no longer allows personal sites to participate in the AdSense program if they also contain advertising for term paper sites. I assume this is only because whiny teachers kept complaining to Google about how term paper ads were appearing on their own sites and other "educational" sites.
This has absolutely nothing to do with AdWords. AdWords will only ban illegal products.
Plus, even if it were true, it's not a "blow" to anyone, really. All essay sites would still be on even ground in regular search results.