I Have personally seen the following Psak.
A teacher who hits a child for good reason and (mistakenly) kills him is P’tur from Golus. Similar to a doctor during surgery, or a court officer who whips within the proper amount.
THEREFORE; since a teacher/rebbe has physical authority over his students, their possessions are forfeit.
So yes the teacher, when acting in good faith- has full right to confiscate and not return.