I didnt submit my full final year project because of such clauses, while my supervisor ensured me that the college wouldnt take control of it, I was willing to let it have the potential opportunity to do so.
Instead I provided a scattering of 58 demos, and video footage, unfortunately I sacrificed my college degree for my own personal project. In hind sight its best to avoid doing so, but I still got a good degree even after submitting a project I was not 100% happy with (I would have prefered to submited the full working games engine as opposed to the elements that made it up)
Another friend, simply stated in their Thesis that they used X Libraries all of which were his own work, and hence got around submitting the code for the libraries by saying that.
Its your call, but the college owns the rights, you use their PC’s their Network, Their Resources, Their Professional Guidance, and most importantly Their Seal of Approval. When all is done they are more than entitled to recoup those expenses anyway they can. I know most colleges wont go after your project, but certain ones will.. is your college one of these?