They're a customer in the same way that a martial arts student is a customer: getting your butt kicked is literally what you're paying for.

Sure. And just like with a martial arts student, if you kick their butt too hard, you will lose the customer and might get sued.

Sued for giving out hard work assignments? That doesn't sound plausible. Under what theory would a student have a case?

Teachers and school districts are often sued by irate parents when their little golden angel gets a bad grade. Schools are therefore incentivized to allow all students to pass, regardless of ability.

https://www.cbsnews.com/philadelphia/news/suing-over-bad-gra...

https://www.npr.org/2007/03/13/8278150/parent-sues-school-ov...