The esp32 supports efuses that can be used to require a signed binary to boot. So they could lock their hardware to only work with their binary. Source code wouldn’t matter.
Of course if the source is open you can buy and put together your own hardware and then put their code on it.
I’m not advocating what they’re doing. Rent seeking is rent seeking even if they need to recoup development costs. I’d rather pay for open hardware and software with no monthly fee.
These schools have huge endowments that can fund their entire operation. Cancelling a popular class because it can’t get funding is just a smokescreen for school politics. Someone wants to take things in a different direction.