"Is School Prayer actually prohibited?
No. The Engel v. Vitale decision of the U.S. Supreme Court in 1962 prohibited only state-mandated prayer in public schools classrooms. As Richard Riley, the former Secretary of Education, stated: "...religious rights of students and their right to freedom of conscience do not stop at the schoolhouse door." 5 He was apparently quoting another landmark Supreme Court decision: Tinker v. Des Moines where the court ruled that students do not "shed their constitutional rights to freedom of speech or expression at the schoolhouse gate."
Students in U.S. public schools are free to:
Take Bibles or other religious texts with them on the school bus.
Pray alone or in groups at the flagpole or elsewhere on school grounds.
Pray in classrooms outside of regular teaching hours.
Say grace and/or pray in a school cafeteria.
Form a Bible study club or any other religious club, if even one student-led group is already allowed in the school. This is a guaranteed right under the federal Equal Access Act of 1984.
Students can wear T-shirts with religious text. They can wear religious jewelry (buttons, symbols, crosses, stars of David, pentacles, etc).
Students can hand out religious materials.
Although these rights are guaranteed by the U.S. Constitution, they are not necessarily granted by school officials automatically. Fortunately, a variety of legal organizations, such as the Rutherford Foundation 6 and American Civil Liberties Union 7 can intervene on behalf of students and explain the law to the school administration. These matters are usually cleared up very quickly, because of the wealth of case law supporting student rights. The Rutherford Foundation has stated: "Many cases can be solved with a strong and professional letter from an attorney, a legal memorandum from our office, or a phone call from a staff member.""
Again, this has nothing to do with the US Government, but the decision of the local school.
Edited because I forgot to add the link:
http://www.religioustolerance.org/ps_prag.htm