Mstevenson, Welcome,sounds like some fun ahead. It would help to know how many t-shirts you have, colors of shirts, size of tree? If the shirts were tiny, I think using the old clothes pins and clipping them together on the sleeves and running around the tree like garland would be cute. Bigger ones could be painted on.

The color of the shirts could be the start of certain tree themes. Baseball or sport themes, Green=Grinch, White=Snowmen, Blue+Smurf, Multi Colored=Rainbow Tree. This will be fun to see what ideas the others come up with.

Punk

How 'bout a 'tea for two' for the theme ... make some teacup ornaments to use ...in pairs ...plays off the 'tee-shirts' on hangers theme...like punk said, if miniatures could use for garland...if just size small adults you could tie them tog for a 'tree tee skirt' around the tree.

If you don't want to make some kind of 'paper' tea cups, you could probably use foam cups for the 'form' & go from there! Jeanne

When my husband and I were first married and didn't have a lot of money for Christmas decorating, I used empty animal cracker boxes. They were light weight, and already had the string on them. (My nephews loved helping me get *rid* of the cookies. Ha, ha!) If the mini-t's are in the same color family, that would be cute. A circus theme could be fun.
Good luck to you and your class.

You could have your pupils bring in their small stuffed animals and dress them in the t-shirts. Then place them in the branches. With a cranberry garland and some pinecones and a few white lights, you've got a pretty sweet tree.

I think a blue jean / denim garland would be really cute to go with the t shirts. This might be too much hassle though. Maybe you could make a colorful garland from dollar/thrift store winter scarfs. The kids could decorate some mittens and cut out snowflakes. Add lots of large and small inexpensive colorful balls.

You did not specify the size of the shirts.
If they are small enough, the class could do a Flat Stanley tree using their own photos. They make a paper doll wearing a tee and with their photo for the head.
If you are not familiar with Flat Stanley it is usually a class project based on the book about Flat Stanley. The students make a flat paper doll with their own face and then send it to friends and relatives who take pictures of the dolls' adventures and then return it to the student. Since Flat Stanley goes on adventures, the students could bring in Hot Wheel cars, small planes, and trains to decorate the tree. Travel pictures, postcards, travel brochures, even photos cut out of magazines could be put on note cards and glitter the edges or fancy trim around the edge to make decorations. You can google Flat Stanley for more information.
Then since they are 3rd graders, I'd add paper chains, glittered stars, colored lights, and twist glitter pipe cleaners into curlicues for interest.
Finally if you have access to an old cardboard globe, I'd cut a hole in the bottom and use it for the tree topper and the theme would be "Around the World Adventures of Mr/s _________ Flat 3rd Grade Class."

If the t-shirts are too large for that idea, and can be cut up, cut the body of the shirts into 1" or 2" wide strips. These can be stretched out and they will curl into long skinny tubes. Then you can tie the tubes together to make garlands, bend the coat hangers into circles and tie cut tube pieces onto them to make wreaths that can be hung on the tree. You could also cut up plastic grocery/store bags into strips to add to the tee strips (there are lots of how to's using plastic bags to make wreaths on the net) Then make tassels out of more strips. The coat hangers could also be stretched out and make a candy cane shape using the hook top for the candy cane hook and then wrap strips of two different colors of tee around them to make candy canes.
Make Snowman Hats by painting small mushroom cans or tomato paste cans black, glue open end onto larger black cardboard circles, run a strip of tee or ribbon or even construction paper around the hat at the brim, cut small holly leaves and berries out of construction paper to complete your Snowman Hats. Make paper cones out of old magazine pages and fill with small pinecones, acorns, or any other found items in nature.
The theme for this tree: "A Recycled Ragge-Tee Tree."

Sounds like a fun project whatever you do.
Please post pictures of the final project.

Candy

OMG, I can't believe all the GREAT ideas that were suggested here!!!