If this happened in a dorm like a college (students are over 18) then yes, there shouldn't be much of a problem as they are adults. The school, owning the dorms are responsible for what goes on there, but I don't see how they can be held responsible for people having consensual sex with each other. However, they do have a right to set rules for the students to follow while on the school's property, so the only fault here is that they let the other things happen (drugs and alcohol assuming that is illegal for them) go on and choosing to punish only the sex instead.
If the students are under 18 (not considered adults) the schools could be sued by the parents for allowing it to happen on the school's property, so the school is doing what it can to prevent it (doesn't change the fact it already happened, but prevents those specific students from doing it again on the school's property and serves as an example to others who might think about it).