Welcome to the Forum @Michelle_Poole1 and thank you for reaching out!
I can confirm this is not a Bug but rather the current behaviour. As it stands, it is not possible to limit the option of Assignees to only project members.
Just to let you know, there is an existing thread regarding this topic in the #productfeedback category. I would encourage you to cast your vote: Limiting what users show up as Assignee options for tasks
Please let me know if there is anything else I can help you with Michelle! Have a nice day!