The rapid integration of Artificial Intelligence (AI) into educational systems marks one of the most transformative shifts in the history of learning. This paper examines the dual nature of AI-powered education - its remarkable potential to democratize knowledge through personalization and accessibility, alongside the profound ethical and structural challenges it introduces. Drawing on policy frameworks such as India's National Education Policy (NEP) 2020, and examining global trends in digital literacy and algorithmic accountability, this research presents a comprehensive analysis of where AI-driven education stands today and what responsible, inclusive implementation demands for the future. The paper concludes with actionable recommendations emphasizing responsible AI design, equitable digital access, and proactive governance.