That's wrong in a free society. The answer to the monopoly problem, of course, is to separate school and state for the same reasons we separate church and state. We don't want the state to be our pastor. If it must do something, let it do no more than keep the peace, so that we may each pursue the good life as we see it. Private schools of course should be free to make community service part of their curricula if they wish.
Parents are free to find other schools if they object.
The market will cater to a variety of consumer demands. If people want to perform community service or have their children so do, nothing stops them. Tens of millions of people, including students, already do uncoerced community service. Advocates of community service should be offended that it would be part of the school curriculum. If it is explicitly compulsory, we have the absurdity of mandatory volunteerism.