I got round the problem by paying, from my own pocket, for a student place on the trip and taking my young cousin with us. My choice of actions meant that the parent of the non-travelling student received a full refund (including his initial deposit) but otherwise, had it had been necessary, the school could have taken legal action to get much more money from the parent.
It's impossible to give a precise answer to the situation you describe, because we don't know what the school's contractual obligations are. They will almost certainly have booked the holiday through one of the travel companies which specialise in schools' travel. They will probably refund anything which they can get back from that company but, equally, they will probably also demand additional payment for any losses which they might suffer.
Chris