Is it fine to use “锻炼” as in "good practice" or not? The sentence in question is "我觉得留学是一种很好锻炼" Can I use “锻炼” in this context?
If you want to express: I think studying aboard is a good practice, then your Chinese sentence "我觉得留学是一种很好锻炼" doesn't connote the same meaning in my opinion. 

"我觉得留学是一种很好锻炼" means "I think studying aboard is a good way to train ourselves." The sentence doesn't specify the areas(willpower, ability to live alone and etc.) on which we can get trained. 

Well, "studying aboard is a good practice" is like saying 出国留学是一种很好的实践 in Chinese.

Note that you should add a 的 in your sentence to make it more natural: 我觉得留学是一种很好的锻炼.