As the forum charter [webmasterworld.com] suggests - the forum is no place to request legal advice.
If the site isn't worth paying a lawyer to consult on this issue - I would try removing the offending content (and notify them that said content has been removed), and review your disclaimers and make sure that it is understood that the site is not officially associated with this school etc etc.
Since there are several similar cases in the courts right now, you might want to keep your eye on them and see what the judges say. They have more training than we do.
As always, if you are unwilling to fight them, they will win. And it can cost a lot to fight a group like the UC regents. It might not cost so much if you are fighting a local school district in rural mississippi