To confirm, this is for Grass Valley Aikikai? That's what your profile says, so that what I'm assuming.
Probably a good idea to think about cost up front: How much is reasonable to spend per T-shirt? That will determine how many colors on the shirt, how big the image is, if the shirt is 2-sided, if the shirt itself is white or some other color.
A couple ideas off the top of my head:
*Render the Japanese characters for "Aikido" so that they look like blades of grass, to emphasize the "Grass Valley" connection. Then have the name of the dojo fairly large and visible on the logo as well.
*Mmic the "iPod" ads where there is a black silhouette of somebody dancing with an ipod on a colorful backround. Take a very dynamic image, like a cool throw or something, from your classes or by permission from somewhere else, and turn it into a silhouette. Then place the image on a colorful shirt. In the upper left-hand corner of the image, place the following text: (
aikiido). So it's a play on words since the first syllable of "ipod" and "aikido" are similar-sounding.
"The Internets" is also a great place to get ideas and to see what other dojos have put together for T-shirts and logos. See what you like, and use that as a starting point for your own ideas. Make sure not to copy someone else's logo outright, of course.
I agree with Dieter that a student "contest" might be a good way to go. It will certainly get the kids invested in the idea, creating and selecting a design. There's some possible competition pitfalls there though, esp if a vote or a prize is involved. Some kids may take it personally if their designs don't win. Also, there's some letting go of control over what kind of design is selected. If you really dislike a particular design for legitimate reasons but it has been voted on/selected as most popular.