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Tuition can easily get in the tens (if not hundreds) of thousands of dollars for a 4-year degree. This is unarguably many times over what the university needs to cover the costs of offering their services. Why is this the case if they are usually run under a non-profit architecture?
Where is all this money going?
I think that education in US, even in non-profit institutions, is expensive, because colleges and universities can charge basically whatever amounts they want, a practice, to a significant degree, IMHO prompted by trying to stay competitive by overspending on amenities, many of which are very remote to the nature of education and learning. Of course, there are significant costs, some of which are appropriate, such as salaries for faculty and staff, equipment for labs, some research programs and other reasonable expenses. Having said that, I believe that some of the expenses are over-inflated, such as (too) nice and fancy campuses and buildings, top administrative and executive compensation, research labs and programs that don't produce significant enough output, sports and other over-spending sources. That is not to say that tuition and fees cover all those expenses - universities traditionally rely on various financial sources in addition to tuition and fees (see the last link below). Of course, the above is just my somewhat naive (but, hopefully, not so far from reality) interpretation or, rather, impression of the complex ecosystem of higher education.
More details on the topic can be found on Wikipedia (i.e., see this section and this article) and other resources (i.e., this article). In the popular press, there is no shortage of opinions, both blaming colleges and universities for exponential increase of the cost of education as well as defending their actions and situation. Those interested in a more comprehensive economic analysis of the subject, can be referred to a significant amount of existing academic research, such as this thesis.
Tuition rates have grown much faster than inflation over the past decades; most estimates show that they've more than doubled -- after adjusting for inflation! -- in the past 30 years.
There seems to be a large body of evidence and broad consensus supporting the idea that a disproportionate increase in the number and/or salaries of university administrators is responsible for this growth. A quick Google search turns up hundreds of articles, many of which link to the primary data. This trend seems to be global. A few examples, of which I suggest reading at least the first:
This list could go on for a long time, but you get the idea. There are other theories; here is one opposing point of view.
I was happily surprised to see that my own institution's budget for next year adds about 15% to research and education (we are growing), while decreasing the budget for administration and finance by about 8%! But we have an unusual President, whose priorities are in the right place. And we don't charge tuition.
There is a long list of possible answers to the question, and different answers will apply to different schools. Cal State LA is not the same as USC, although neither is a for-profit entity. Not all universities in the US are expensive. Some have big endowments and some do not. Some nonprofit universities are private, and some are public. For the public ones, the level at which the cost is set is based on how willing the voters are to pay for the system. Here are some general answers:
The more expensive schools are competing against each other to provide the best amenities, such as rock-climbing walls. This is described in more detail in Aleksandr Blekh's answer.
As described in David Ketcheson's answer, many schools are topheavy with administrators.
Being cheap can, counterintuitively, be a competitive disadvantage in attracting students. Affluent parents may figure that if school A costs $50,000 a year, and B costs $25,000, then B must not be as good.
At many private schools, there is an expectation that nobody will actually pay full tuition. What you actually pay is based on your ability to pay.
Students have opinions about where they want to go to school, but the bills may be paid by the parents, not the students. Or if the students are paying, they may be using loans, so the money doesn't seem real to them.
Education is seen as a public good, and therefore there is a tendency for government to subsidize it in various ways, such as tax-advantaging college savings funds or Pell grants. These subsidies distort the market and raise prices. Although the question is about nonprofits, the extreme examples of this are for-profit schools such as the scandal-ridden Everest College, which had an absurd cost-to-value ratio.
In fields like science and education, research activities act as a subsidy to the school, since the school charges funding agencies an overhead as part of grant funding. However, research in some other fields may be a net loss for the school.
Similarly, some sports programs may produce net revenue for the school, while others are a net loss. This is controversial and hard to measure. E.g., you can't tell whether USC's football program causes alumni to feel connected to the school and therefore donate money.
Some subjects are just expensive to teach. For example, undergraduate physics labs are expensive to run, but they're needed as a service to other departments such as engineering.
Haha! Market economics and myths about degrees and particular institutions, and crucially the value of networking in professional life after university.
In reality much smaller, flatter structures than universities could provide the same (or better) standard of tertiary education. A lot of the seminars could possibly be done by skyping or hiring a cheap room locally. Lectures (if indeed they are ever genuinely needed) could be delivered by YouTube. This wouldn't prevent the possibility of social interaction with other students.
For most subjects these days, most learning is self-learning, done by reading books (and of course use of the Net).
What you are paying for is NOT quality of education, NOT face-time with your teachers and NOT lectures (you could get that info more efficiently by reading). Contrary to myth, the value of university is not even about "having a good time"/"so much more than education".
In reality you are paying for a piece of paper which says "Yale" or "London University" or whatever, and the value of that piece of paper is that potential employers regard it as a badge of seriousness, not of education.
The other thing you're paying for is to make friends. The idea is that subsequently they and/or you become moderately successful and help one another out.
And the level of the fees? They charge whatever they can get away with. Everything is now "marketised" (already in the Anglo-Saxon world, and the rest of the world will have to follow suite). Even if they didn't spend the money on staff salaries they would find ways: advertising and branding, preposterously expensive research facilities, Hadron coliders, sabbaticals... the list is endless: university managers are creative people in one way at least.
