Looks like it's not focused on the student's schoolwork/personal data but how they use the devices/services.

From the original BleepingComputer article that The Verge article is based on:

https://www.bleepingcomputer.com/news/google/denmark-orders-schools-to-stop-sending-student-data-to-google/

The agency clarified that permissible uses of student data include providing the educational services offered by Google Workspace, enhancing the security and reliability of these services, facilitating communication, and fulfilling legal obligations.

Non-permissible cases are purposes related to maintaining and improving Google Workspace for Education, ChromeOS, and the Chrome browser, including measuring performance or developing new features and services for these platforms.