Many universities compete to have as high of a ranking as possible. There are two main factors - incoming student statistics (rejection rate) and research. Universities compete for the top students by offering things that they can brag about to high schoolers on tours - lazy rivers, activity centers, new dorms etc. They want as many people to apply as possible so that they can advertise their selectivity.

They also spend big money on research space and efforts that have little impact on the career trajectory of students that stay only for undergrad degrees (which is why most students are there).

Many parents have embraced safteyism and see college age students as children who need the university to be their parents. Just look at therapy for example. Most people view that therapy provided for free by the university with limited wait time is a must - whether this is good or bad it has to be paid for somehow.