Self inflicted wounds, in two ways.
1) the priest child abuse scandals that have been going on for 20–25 years have soured an entire generation of Catholic youth on the so called ‘benefits’ of a catholic education. The abuse was all over the country – almost every state – so it was pretty universally seen as a catholic specific issue. Why would kids want to go to a university with such awful baggage?
2 Although many catholics believe strongly in the infallibility of the pope and the teachings of the Church, it is increasing clear that youth – the age cohort that is going to college nowadays – does not agree with the teachings of the church.
Sure, some youth do believe church teaching, but many other of that age group see Church teachings as obsolete – simply not in touch with their intelligence and values. There are so many areas where Catholicism is not where contemporary society is.
Just a few examples:
– abortion (a huge one for this age cohort)
– birth control
– inability for priests to marry (unrealistic in this day and age)
– homosexuality, gay marriage, transgender etc.
– the concept of an infallible pope (people have a very hard time with this)
and then lesser things like:
– the church’s legacy in WW2 cozying up to Hitler
Yes, the church stands on its theological foundations, as is its right and obligation. And history.
BUT the inexorable result of being so out of mainstream thought is that your religion loses adherents, which means they lose the next generation of Catholics, which in turn means they lose money, which in turn means the closure of schools and universities.
Short version: they did it to themselves.