Allah, may He be exalted, has enjoined parents to take care of their children, both male and female. Taking care of them is not only limited to giving them food and drink, and clothing them; rather there are things that are more important than that and more deserving of the parents' attention and concern. What we mean by that is bringing children up with Islamic attitudes and love of the faith; teaching them beneficial Islamic knowledge; making sure that they are adhering to Islamic duties, foremost among which is the prayer; and making sure they avoid bad friends and bad attitudes.
Perhaps choosing a good area to live in and choosing good neighbours and friends plays a role in good upbringing and care of children. Choosing a good Islamic school also has a major impact in giving children a good education and upbringing.
The fact that the Islamic school was built with a riba-based loan does not mean that the Muslims should not send their children there. The sin is only on the one who took out the riba-based loan, not on the students or teachers.
If someone builds a house with a riba-based loan, the sin is only on him alone; it has no impact on anyone who visits him in that house or eats his food, although they should advise him to repent from what he has done. We have discussed this issue in the answer to question no. 110208.
Even if a mosque is built purely with riba money or by borrowing the money to build it from a riba-based bank and paying it back with interest, that has no impact on the validity of prayers offered in that mosque.
Shaykh Muhammad ibn Saalih al-Uthaymeen (may Allah have mercy on him) said:
That also includes an issue that confuses some people: if there is a man who deals with the bank or deals with other matters, the earnings on which are haraam, then he builds a mosque or repairs a road. Then one may ask: is it permissible for me to pray in this mosque that he renovated with his haraam money, or to walk on that road?
We think that there is nothing wrong with praying in this mosque, even if it was built with riba money or with other haraam earnings, because the sin is only on the one who acquired wealth in that way. Moreover we say: perhaps this man who built this mosque had recently repented and he built it in order to absolve his sin and get rid of the haraam wealth. So if we pray in the mosque and encourage him, we will be helping him in his repentance. End quote.
Ash-Sharh al-Mumti ala Zaad al-Mustaqni, 10/60.
Based on that, there is nothing wrong with you sending your children to this school, whilst offering advice to those who established it to repent to Allah, may He be exalted, and to strive to ensure that their wealth and work are halaal and permissible so that Allah might bless them for them.
And Allah knows best.
Reproduced from Islam QA