There are two free programs that I think are great for editing and creating graphics.

The first is paint.net. This software was originally created as a school project and is now continually being modified and improved. It is a great tool for editing photos and graphics. I found it to be very polished and powerful. There are tutorials, a user forum, and a great help section available also. I use this for editing graphics for school projects and for this blog. 

Tuxpaint is a great drawing program, especially for the lower grades. It is easy to use and has a lot of built in functions.

I use paint.net to edit photos and graphics that I then use in my classroom. I've used Tux Paint to create some simple graphics for my lessons.