Historical perspectives on federal regulations are examined since 1958 along with five dilemmas that cause universities to improve university operations by reforms in current federal regulations. The National Defense Education Act of 1958 and the Higher Education Act (NDEA) of 1965 are often identified as two of the major milestones in the development of federal involvement in contemporary higher education. The NDEA moved to guarantee opportunity for higher education to greater numbers of young people and increased the size and scope of the federal government's role in supplementing the states in the field of higher education. The 1965 Act provided educational opportunity grants and solidified the federal role in higher education. Despite the fact that universities must comply with federal regulations and bear the cost of operating a student financial aid office, the universities largely follow that course because of the dramatic need for student financial aid. Additionally, the shortage of funds for innovation in teaching and curriculum development has prompted universities to apply for federal funds, despite costs to prepare and administer grants. Doctoral institutions require research funds, and institutions generally need funding of special projects (e.g., public television stations). Finally, a question at issue is how often a university should challenge federal regulations that it feels are unduly restrictive. It is suggested that universities need to propose a plan to the Reagan Administration that would restore autonomy to the campus. (SW)