I think it is easier to have the children use permanent fabric markers. That way you don't have to iron to get the wax out. You do have to iron to heat-set the markers, I think.
Crayons are fairly pale after the wax is out. You could be disappointed if you are expecting brilliant colors similar to crayons on paper. The result on fabric is beautiful, but definitely pastel.
Both markers and crayons require a lot of work if the children are doing "filler" areas with solid colors. It takes time. They might have to color a solid area in 3 or 4 directions to fully cover up the background fabric.
For either crayons or markers, it's a good idea to iron freezer paper to the back of the fabric before cutting into squares. This way the fabric won't wiggle and squirm while the children are working with it.
I haven't done it, but I would also consider using paints/dyes rather than crayons or markers, especially if you could set up a table outside for the children to work on. Requires a little more expertise on your part, as you would have to show them how to use mordant to outline their shapes before painting. There are fabric paints/dyes that are pretty easy to use and can be heat-set.
Important!!! Whatever you decide to use, draw a border inside the cut square so the children do not color out to the edges. Otherwise the edges of their pictures could end up in the seam allowances!