You certainly have the right to say yes, no, or maybe as you see fit. In general, if done as part of an art class for instruction and critique, students can usually paint a copy of a photo or other image, provided it is done for the class, and kept as a single copy for personal use only, and not re-sold, or have any other copies made. That's a provision of Fair Use.
I get asked this question quite frequently. If someone wants to do a painting of my photo, and it is not for a class, I tell them that they require a derivative use license. (Just putting the image into a different medium has no effect on making something "not a derivative".) Derivative means derived from... photo to painting, photo to sculpture, photo to jello & whipped cream collage, it doesn't matter. If someone can tell that image A was derived in any recognizable form from image B, then that is a derivative use.
I'll ask a person what their plans are, is it for personal use, or do they plan on making multiple copies or selling the painting. Also, Ill ask if the image will ever be displayed at a place where the public is required to pay admission to view the artwork. Those are variables that are taken into account when determining the commercial value of a derivative use license. If it's for personal use only, I may charge a basic research / personal use license fee of $50.00 and offer to send them a full screen watermarked scan to help them paint. If they plan on selling the work, I may charge a few hundred dollars, plus charge a royalty percentage on each print sold, determined by the number to be produced, and how much they'll be sold for.
So you could say yes, & let them do it for free and make no money, you could say yes and make money, or you could say no and make no money.
Of course you were right to reply politely. Filed under: Do unto others...
Hope that helps.