I think the NCAA changed the rule after the USC vs. UCLA brought their tradition back in 2008 or 2009. But now teams must agree to it beforehand in order to not lose the timeout.
You are correct. Here is the rule from the ncaa rule book:
Contrasting Colors
ARTICLE 3. a. Players of opposing teams shall wear jerseys of contrasting
colors. Players on the same team shall wear jerseys of the same color and
design.
1. The visiting team shall wear white jerseys; however, the home team
may wear white jerseys if the teams have agreed in writing before the
season.
2. If the home team wears colored jerseys, the visiting team may also
wear colored jerseys, if and only if the following conditions have
been satisfied:
(a) The home team has agreed in writing prior to the game; andFR-32 Rule 1-4 / The Game, Field, PlayeRsand equiPmenT
(b) The conference of the home team certifies that the jersey of the
visiting team is of a contrasting color.
3. If on the kickoff at the start of each half the visiting team wears a
colored jersey in violation of the conditions specified in Rule 1-4-3-
a-2 (above), it is a foul for unsportsmanlike conduct.
PENALTY—Administer as a dead-ball foul. 15 yards at the succeeding
spot after the kickoff. If the kickoff is returned for a
touchdown, the penalty is assessed either on the try or
on the succeeding kickoff, at the option of the home team
[S27].
b. A white jersey is one with only contrasting playing numbers, player’s
name, school name, NCAA Football logo, school insignia, conference
insignia, mascot insignia, game insignia, memorial insignia or the
American flag attached. An insignia must not exceed 16 square inches
in area (i.e., rectangle, square, parallelogram), including any additional
material (e.g., patch). Stripes may be placed on the sleeves. A border not
more than 1 inch wide around the collar and cuffs is permissible, as is a
maximum 4-inch stripe along the side seam (insert from the underarm to
pants top).
c. If a colored jersey contains white, it may appear only as a number,
border of a number, player’s name, school name, stripes on the sleeves,
a border not more than 1 inch wide around the collar and cuffs, a
maximum 4-inch stripe along the side seam (insert from the underarm to
pants top), or as part of a legal insignia (Rule 1-4-3-b).
d. If worn, gloves or hand pads must be gray in color on the back, including
the backs of the fingers. It is strongly recommended that the palms also
be gray; however, black on the palms is acceptable. The recommended
shades of gray are Pantone Cool Gray 8C, Cool Gray 9C, 423C and
430C.
PENALTY [b-d]—One charged team timeout per half