At least three students were seriously injured in the collision outside Saint-Exupéry high school near the French city of Toulouse.
Police say the incident which occurred at around 4pm local time, was deliberate.
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Toulouse prosecutor Pierre-Yves Couilleau said: “For the moment, it is not being looked at as a terrorist incident although it is also not ruled out.”
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The incident occurred just as an ISIS linked group released a chilling warning that they were planning another atrocity in France, this time targeting children, to mark the anniversary of the 2015 Paris attacks.
The Express reports: The driver attempted to drive off but was stopped by police and arrested straight away.
As he was arrested by police he told them he heard voices telling him to hurt someone, local media said.
They were transferred to Purpan Hospital in Toulouse.
The male driver, reportedly born in 1989, was arrested at the scene.
Police sources told Agence France-Presse the incident was a “deliberate attack” but the suspect was not on a list of known extremists.
Officers said the 28-year-old man was known to the authorities and had a previous history of drug use and schizophrenia.
According to French newspaper Le Figaro, the driver had previously attended a psychiatric hospital.
The Mayor of Toulouse, Jean-Luc Moudenc took to Twitter and said: “Very shocked by the aggression against the students in Blagnac. We offer them and their families all of our support”.
A local police source said: “The car mounted the pavement soon after 4pm and caused immense panic as it targeted students leaving the college.
“The man responsible was known to police but had no history of terrorism. He has severe psychological problems, and had been placed under supervision in the past.”
The college campus comprises of several postgraduate courses including journalism, computer science, real estate and business.
Paul, a communications student at the IGS campus told local media: “I was in class and I heard sirens.
“We thought about an accident because when we got off the campus there were a lot of police cars on the ground. The school management did not explain what was going on.”
The driver was stopped on boulevard de l’Europe shortly after the collision.
Toulouse prosecutor Pierre-Yves Couilleau said: “The individual was known to the police and the judiciary for several offences.”
He added: “For the moment, it is not being looked at as a terrorist incident although it is also not ruled out.”
More than 240 people have been killed in France since early 2015 in attacks by Islamist militants or assailants inspired by the Islamic State group.
Monday will mark the second anniversary of attacks in Paris that killed more than 130 people.
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