They are citizens of the US. The flag represents that. In international schools, they fly the flags of all their students. If they want to relinquish their citizenship and go to a non-public funded school, thats their choice. But as long as there are Americans going to a school paid for by American taxpayers, the admin should have the right to signify this. I'm not saying that the students should have to respect the flag, far from it. But the school was paid for by America, so it should be able to fly the American flag.
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