I think the government has a right to ensure that the aid it pays out for an education is actually going towards an education, and not a front for siphoning federal aid for the enrichment of executives and shareholders.
So many public and private non-profit universities are going to wet themselves if anyone starts enforcing that rule. Ok, they don't have shareholders, but it's well documented that the increasing cost of university and college educations is largely driven by administrative overhead and not paying professors, adjuncts and lecturers.
On the customers - the ability to attract modern students rests more on amenities like dining halls and dorms, not on the academics. Sad, but ultimately true.
http://www.wsj.com/articles/SB100014241278873233168045781614...
http://www.huffingtonpost.com/2014/02/06/higher-ed-administr...
That document the growth in non-teaching administrative and professional staff at universities. Staff that grow at more than double the rates of enrollment and teaching positions.