Encoders aren't really that expensive; it might be more economical to replace them on the motors that need that rather than scrap them and put steppers in their place, At least you'd have motors with sufficient torque to move the joints. Here's a source for reasonably-priced optical encoders; see if you can find ones that match the shaft size and line count of the ones you've got:
US Digital | Products
I'm not sure you'd be doing yourself any favors by replacing the mechanicals either; if these arms were set up to use servos and chains, it would be a bit of work and expense to replace them with steppers and belts that might not function as well. I doubt that the machines your students would see in the field are all driven one way or the other, but I doubt the belt-drive and stepper approach is used in the more heavy-duty arms. If it's really important to you that your students learn a particular software, then I'd suggest reaching out to Fanuc and Yaskawa (or Kuka, SCARA, ABB etc.) Companies will generally provide deep discounts (if not free stuff) to educators training students in the use of their products - it makes good business sense. Here are a couple more software suites to check out:
ArmCtrl
ST robotics software suite