As college operates today, when you take summers and term-time breaks into account, virtually all BA-granting schools shift into low gear for about half the calendar year. At a first approximation, you could run two complete colleges, with two complete faculties, in the facilities now used half the year for one. That's without cutting the length of students' vacations, increasing class sizes, or requiring faculty to teach more. Simply by spreading the fixed costs of a campus over twice as many participants, you could make degrees meaningfully less expensive. More students could go to college and receive better educations.
First and foremost, we need to distinguish three basic kinds of facilities on a typical (residential) college campus: offices (and similar workspaces for faculty, staff, and administrators), classrooms, and dormitories (and dining halls and other facilities used by residential students). When Karelis and Trachtenberg (former presidents of Colgate University and George Washington University, respectively) point out that classroom instruction typically covers only about 30 weeks out of the year, they're talking about one use of one kind of building.
Office spaces are typically used throughout the year. I would estimate that the average faculty member uses her office somewhere between 40 and 45 weeks out of the year. While doubling the number of faculty might not require doubling the number of faculty offices, it would still require a massive physical plant investment. Staff, who don't have the flexibility of working from home, work around 50 weeks a year, depending on the university's vacation plan. (And let's not overlook the fact that twice the students and twice the faculty would also require about twice the staff -- or require them to work much, much harder than they do right now.)
Turn next to classrooms. Instructional time isn't the only time classroom facilities are used during the term. There are also two or three weeks of finals every year (depending on whether the school operates on semesters or quarters), plus a `reading period' where classrooms are used for review sessions leading up to finals week. All together, I'd estimate that classrooms are used for 3-5 weeks out of every year beyond the 30 weeks of instructional time. Take off a couple more weeks for university-wide vacations (eg, Thanksgiving and New Year's) and the need to actually maintain the classrooms, and I suppose you'd have just enough time (14-15 weeks) to squeeze in another term.
But class-related activities aren't the only things classrooms are used for. There are also debate tournaments, conferences, orientation activities for first-year undergraduates, alumni reunions, REUs, and summer camps. The more non-instructional activities the college or university wants to use its classrooms for, the more time has to be shaved off that extra session.
And finally there are dormitories, dining halls, the student union, and other such buildings used by residential students. Students typically use these facilities for at least a week before (for new students) and after (for graduating students) the regular academic year (and that's including finals). Depending on the size of the residential life staff, another week or two is necessary to clean and maintain these between academic years. This makes it logistically impossible to double the use of the dormitories, or even bring in another group of students for the extra summer session that is a substantial fraction of the regular-year group.
This is why -- at least in my experience -- colleges and universities don't use their dormitories to house (undergraduate) students during the summer, even when they have a summer session. Instead, those residential facilities are used as cheap and convenient housing for conference attendees, REU participants, summer camps, etc.
But this means that the number of students around to take advantage of a summer session is relatively small. And so, despite the complaints of Karelis and Trachtenberg, the typical summer session offers only a relatively small selection of non-specialised and introductory classes -- with only a fraction of your students around, it's hard to get a quorum of majors that can take an advanced upper-division seminar, but there are always people who need to take or re-take calculus.
So it would actually be quite difficult for most colleges and universities to roughly double their faculty and student body by adding additional sessions. There are ways to squeeze a few more efficiencies out, of course: more night and weekend classes could be adopted almost universally, and schools with a relatively small residential population (as is the case with many public universities) could offer a full slate of summer classes. But these are not going to result in a dramatic reduction of the cost of a college education. Karelis and Trachtenberg themselves give only one example -- Dartmouth, which requires students to take a full courseload one summer, in place of a regular-year term -- which increases enrollment by only 14%. Considering the effects of adopting such a plan on a medium-sized private university (George Washington), they estimate savings of only 1% of the endowment per year.