In 2010, the Department of Education published regulations implementing the Higher Education Opportunity Act of 2008. The regulations, 34 Code of Federal Regulations (C.F.R) section 668.18, went into effect July 1, 2010. The law is codified under 20 United States Code (U.S.C.) Section 1091c.
The law and regulations accord the post-secondary education student whose education was interrupted by voluntary or involuntary military service the right to readmission to the educational program. These requirements apply to any educational institution that participates in title IV federal student financial aid programs, including Pell Grants, Stafford Loans, and the Federal Work-Study Program. In Tennessee you are also protected by state law and allows you to litigate against a school breaking federal/state law.
That being said maybe the best course of action would have been to be up front in the application process about your reserve status. It is you responsibility to inform your institution and understand their policies before matriculating.