With the maximum total quoted (1390) and deducting the course cost accommodation would work out at approximately €50 per night for 14 nights. 3 star in Xania is likely to cost well above that, let alone 5 star especially between say, May & September. I doubt the language school is making a profit on accommodation unless they own that, too. More likely they've done a deal with a hotel to keep costs down. "We can guarantee xx rooms so what discount will you give."
Five years ago I was involved with apartment rentals in a resort (not Xania town) and we were charging €60/night, room only in late July & August. If asked for, discounts were 2.5% and 5% for 7 & 14 nights respectively.
Current (typical) examples for 7 Nights
****Doma Hotel €2,436 B'fast incl.
Nikolas Rooms Single €837 Twin €1,115 no stars but well rated
***Villa Andromeda Halepa district €1,680 B'fast incl
1 & 2 are central; 3 is about 20mins walk from centre