The real reason, if you want to get to the core of it, is two-fold: Regulation and changing consumer expectation driven by cheap loans. Colleges and universities prior to perhaps the 90s weren't all that concerned about the student experience, health resources, quality of the dorms, dining, fitness center, etc, etc, etc.
Regulation and accreditation has become more stringent because some for-profit schools have scammed people out of money. Regulation has caused a bunch of positions to be created to make sure that the University is in compliance at all times. Falling out of compliance can cause the university to be sued or lose accreditation. The risk of either is so massive it could close a small college or university so it makes sense to spend as much money as required to mitigate the risk.
Cheap loans have changed consumer behavior in the same way low interest rate loans increase the cost of housing. Consumers are willing to spend more to go to the best. But how is a student to determine which school is best? It is impossible to really compare education beyond the general prestige of the university, so how do schools differentiate themselves among similarly ranked schools? New buildings; more and better services; better dorms; better website / marketing materials; better events and activities for students. A good example of this is the student fitness center. Almost every school now has a massive world-class fitness center, not for student athletes, just for students to workout and play rec sports. These are buildings that cost hundreds of millions of dollars. Great, don't build one you say. Pass that savings on to the students. That is fine, but students will, without fail, choose the school with the giant fitness center. And it can't just be a nice fitness center, it has to be on-par or better than what other schools have.
Schools that are closing their doors are the ones that have left themselves open to risk (compliance, cybersecurity, accessibility, etc) or have not kept up with the arms race for amenities.