Make it clear to the team that the new leader is stepping up temporarily to fill a significant business need. That the engineer is doing the team a favor by doing this and that the plan is for it to be temporary because that engineer is a great IC.
It then becomes very easy for the new leader to go back to being an IC. They can even be thanked for stepping up to help the company during a critical time. They can also easily do it again in the future.
If the person is a great lead and gains the team's respect, then simply make it permanent.
Does your student org suffer from student churn? As in, it's active from Sept-Apr, and 'dead' between May-Aug? Is the idea of student buy-in/engagement something your org has to contend with with?
Speaking locally: if we as students want something to happen, we make it happen - if we don't, it doesn't. Obviously, attendance at our events varies widely between term-time and holiday-time, but we do have enough active members to guarantee our weekly meetings taking place whenever.
Of course, recruiting new active members is a constant and central challenge, but thankfully, my group has been able to maintain a pretty good level (~20 active members out of ~60 regular visitors). Most of the work our regional full-time staff do relates to coaching these active members, and especially the group leaders they elect each semester.
Does that answer your questions, or did you want to know something else too?
It was a soberly disappointing read, if I'm being honest. When you say, "if we as students want something to happen, we make it happen - if we don't, it doesn't", I wish I could jam that into the minds of our members. That said, there was a post on HN about loneliness the other day that had over 1000 comments, and I believe that's exacerbated in our metropolitan city; an existential threat to the cooperative spirit. We're working on it, will continue.
PS: Greetings, and blessings, from Canada.
You're right: there has to be a way to get somebody out of a misfitting leadership role without completely humiliating him. Regular elections are a great way of doing so, and giving many different people the chance to lead benefits both them and the organisation.