Translation:Your classroom is next to mine.
To avoid ambiguity, I would say the complete phrase 我的教室, i.e. 你的教室在我的教室旁边.
“在我 那个/这个 旁边” makes this sentence (not any sentence with this phrase) sound like “we” are talking about the arrangement of classrooms (for an important exam maybe).
I agree, the current wording contains a syntactic ambiguity, or amphiboly; it could mean "Your classroom is next to mine" or "Your classroom is next to me". Perhaps the best thing to do is fix the amphiboly by changing the wording (that is my strategy for fixing amphibolies).
In English "classroom" is often shortened to simply "class" and, in context, would be understood as only the room where the class takes place. But to avoid confusion (a learner thinking that 教室 could also mean "class") I think it's best that Duo insists on "classroom" and not accept "class".