5:39 is *WRONG!* The SAT wouldn't want a wordy answer, so the correct answer would likely be to remove "that they" so that the sentence reads: _The teacher told his students that they should study hard, get a good night's sleep, and eat a good breakfast._
The SAT wouldn't make you choose between those two choices, so if the correction shown in the problem were available, it would be right. However, you are right in that most likely they would offer the shorter correction.
