It's a generous offer, of course, but I would make sure that:
1. the offer is for both your children
2. it's for the length of their education
It could be quite traumatic for the children to have to leave their private school because the grandparents can no longer afford it (or are no longer willing to contribute)
3. the school is among your choices (like someone else said, you can do a short list and they can visit these schools with you). Their input is of course useful, but you and your husband are the parents and ultimately it is your decision.
4. your husband and you are on the same page on the issue (i.e. how involved the grandparents are in the choice) - you don't want this to be something to constantly argue about in the future
Like mentioned before, I would get your husband to start the conversation as it's a delicate issue and he would know his parents better.
I would really research the state school option, as you need to have a viable alternative in case this doesn't work out (and something to compare the private schools you all agree on with
Good luck!