I think he has the right to either ask her to stop the classes or stop the therapy. The dual relationship is clearly a problem here. I think he's choosing to keep her for financial reasons as a client which speaks to his motivation and quality as a therapist in this case.

As many have mentioned previously, if you want to stay in this college program and avoiding his classes is not a possibility, then you really need to drop him as a therapist. Sounds like he isn't much of a winner either way.