I agree that housing density is an issue. However, universities are likely to be subject to lawsuits in situations where they keep dorms open or shut them down. There must be something that can be done here that's better than those two extremes, event if it isn't perfect.
We could:
1. Find alternative housing for some fraction of the students to lower the population density within the dorms--sending 1/3 of students elsewhere reduces population density to ~65% of what it would have been before
2. Retrofit current housing to help minimize spread of disease
3. Allow students to opt-in to remaining at the dorms with agreement to adhere to much stricter health and sanitation standards
4. Allow students to remain with the understanding that they will be quarantined until such a time that they can call be tested
None of these are great ideas, I'm sure, but I can't imagine any of them being worse than the current situation we see these students in.