Let me clarify the federal funding thing...
Yes, the school can derecognize fraternities. They can make you live on campus. They can do all this even if they get federal funding.
BUT....they absolutely, positively cannot ban you from being in a fraternity OFF the campus, if you desire. If LXA wants to let the bros at Alfred retain their charter, and they meet/rush
off campus, they are allowed to do that. This is what got people pissed at I think Colby....they were disciplining students for off-campus fraternal activities. By the same token you cannot discipline students for belonging to the KKK, Jaycees, NAMBLA or any other off-campus group. Even though the goals of the group may be in conflict with those of the college, once you walk off that campus it's your life and not a thing they can do about it.
At schools like the PA state schools where all the houses are off campus anyway, derecognition can prove particularly futile. Yes if something happens the individual fraternity members can be sued, but it's often a case of you can't get blood from a turnip. Most of these kids (and often their parents) don't have 2 nickels to rub together.
Hey Jason - can you PM me about the Greek scene at F & M? That whole deal confuses me.
p.s. No offense to the Jaycees out there.