Could be that there is a law against storing data outside of the EU that might pertain to your school situation, so you might have a right violated. Though fighting that is quite a bit of work. You’d want to escalate things with your school first, but in order to do so be knowledgeable on the issue which requires a big time investment and in the end if your school doesn’t care they are probably gonna bet on you not seeking legal recourse. Which is such a ginormous amount of work they could be right depending on the resources you have.
That’s not to say its a battle not worth having, but its quite the battle if the school doesn’t care, because they can just stonewall and its up to you to overcome it.
As an alternative I unfortunately don’t know of any except a self hosted moodle solution which is a hefty amount of work for the school and might be reason enough for them to deflect or stonewall on the issue. So I wouldn’t go into that with them, let them do their own research on alternatives maybe they can come up with something since they have different resources and connections than you do.