I'd say any financial loss should be borne by the stakeholders.
The direct cost of this type of incident can easily exceed £12,000 taking into account the shock loading on the engine, new crank and prop etc, not to mention the loss of the airframe and its associated income whilst it is rectified. What do you think the profit in a PPL is? The cost can only realistically be covered by Insurance, and one must examine the number of times such events occur, as no doubt the insurers do. It is a costly and largely avoidable event however, there will always be a few such occurrences but if allowed to escalate, they will inevitably cost the club and students more for insurance. Without knowing the facts it is difficult to form an opinion. Many in aviation care about the aircraft they fly but, I notice from the state of many aircraft I fly, that there are plenty who do not!