Free (libre) software isn't necessarily free (gratis) either. Stallman isn't against people being compensated for providing a service, he's against licenses and business models that restrict what you're allowed to do with stuff, especially after you've paid for it. And paid software doesn't really eliminate the need for trained (non-gratis) administration personnel and additional management infrastructure either.
As usual I think the absolute of what Stallman's saying here isn't very pragmatic, but the way many schools depend entirely on massive Microsoft contracts isn't really pragmatic either. My school paid a huge amount of money for these huge accounts with Microsoft. And I saw a lot of students leave school with a heavy dependence on Microsoft. I on the other hand, also completed virtually all of my assignments on a tiny Linux netbook using OpenOffice / LibreOffice that cost me a fraction of what everyone else was using. And even as someone who loves the idea of running `git clone` for software I use to make little tweaks? I never once in 4 years found a reason to do that for OpenOffice or LibreOffice.
Are those Microsoft contracts really worth it for places that have limited funding and a charter to provide education for the broadest good? I'd absolutely agree there's cases where it's better for the school to simply purchase something quick that solves their problem. I wouldn't have a problem with that. But most of the arguments I hear against even considering the alternatives just sound like resistance to change for the sake of it.
If your standard for educational institutions is to learn how to push specific buttons and be unable to learn new software, then they will be failing miserably. And not just because, as you point out in your comment, not every company uses the same office suite. By your standard, using MS Office is already a pragmatic failure for students who go somewhere where they use Google Docs.
Nowadays even MS Office is free for everyone in the Office 365 org, so kids today won't pay until they leave their school and need a home license (and that's if they don't work somewhere that uses Office 365 as well, allowing them to install it on their home machine).
I read it as referring to the hardware. Linux runs inside many SD cards and can run on a ~$3 business card (as well as running on most supercomputers, stock exchanges, the ISS, SpaceX rockets and many cars, etc.)