If they're even remotely competent they're going to wipe the drive and reinstall everything from a clean image.
Of course, depending on the school I wouldn't be all that surprised if they didn't. If you've got something on the computer you're worried about from a security perspective, make sure to delete it before giving it back. If you want to be extra-paranoid you can select "secure empty trash" from the Finder menu, but that's probably overkill--they would have to have a pretty good reason to go digging around for deleted files, since it's time consuming and will take work to produce anything interesting if you don't already know specifically what you're looking for.