Although the university system is funded by either the state or the federal government, This is in part only, and so,it falls on these respective schools to make up the rest of the revenue sufficient
for the day to day running of the institutions.and also make up enough profit always.
Yes, university profits pose a problem for students, because students cannot afford the rising tuition costs. A university that profits will want to always increase tuition so that they can meet demands from professors for higher pay, and research costs. A non-profit university helps the school focus on its mission, which is the students.
The amount of student debt in the US is astounding. Students are being gouged for unnecessary student fees, overpriced classes, and unhelpful professors. I think the amount of debt required to get through college is often not worth it for most students. Universities should not be profiting diploma mills at student expense. .
I do not know to many universities these days that are lacking in profits. Maybe some minority group based universities. Many universities look like palaces with all the revenue they are bringing in. Those universities make it very hard for students to afford them. Those are the universities that are supposed to give the best education though. That is what they say, but I call BS. Everything is a racket these days. You can get good educations at smaller schools, who do not charge people an arm and leg to go there.
I think it is only logical that universities that profit more or less will decide on how they will govern their students. If a university is struggling with profits, it might affect the resources to which a student can use on the campus in terms of education and boarding. Universities are businesses as well.