The provider of the servers? If the students want to use their own server, I’m sure they’re free to do whatever they want. Also VS code has plug-ins that just SFTP the files up.
We encourage students to use their own machines. We even loan out old ThinkPads and MacBooks for students to run Linux on. Very few (3-5 per term) take us up on this offer. Most of our students would rather we do the sysadmin stuff for them.
The only requirement is that the code needs to run on our server, which they can easily check before submission.