The school education is based on the fundamental _____ that students should develop their full potential.

principle 指「原則、原理、信念」，fundamental principle 是固定搭配，意為「基本原則」，後接 that 子句說明該原則的內容，完全符合語意：學校教育建立在「學生應發展潛能」這個基本原則上。