Kevin Carey thinks libertarians are in a bit of a dilemma. The basic idea is that libertarians are generally against
A. Government money for collegesThe implication is that once you have public funds going to colleges, you really need to determine what those funds are being used for and what effect they are having. But since colleges won’t give that info up voluntarily, it needs to be required in the form of some sort of reporting regulations. As Carey puts it "You really can't avoid both."
B. Government regulation of colleges
I’m not seeing why this puts libertarians in a dilemma. When you rule out their ideal world (neither A nor B) by imposing A, they are not necessarily ideologically inconsistent if they no longer support B.
Libertarians love contracts, so once you take it as a given that public funds are going to colleges (implicitly, realistically, and appropriately assumed in the post), there is nothing unlibertarian about structuring that “contract” in such a way that the government gives money to colleges, and in return, the colleges give information to the public so that their use of the money can be evaluated. As long as colleges are free to refuse the contract, there is no problem. The only thing that would be blatantly unlibertarian would be to subject colleges that don’t receive public funds to the reporting requirements.
While you might be able to find some libertarians that would still prefer no B when A is imposed, that doesn’t mean that those that no longer support B when A is imposed are somehow in a dilemma.
UPDATE: In a similar way, you could see the WSJ calling for "an FDIC-style bailout tax" as resulting from a dilemma. Alternatively, you could just see it as no longer opposing B (redefined as taxes) when A is imposed (redefined as guarantees for too big to fail financial institutions).