Of course with the rise of personal computing and cheap hardware, and widely available GUI or WIMP environments that all went away. After all, why use a nasty command line system when you could have one with pictures and clicky things. The world has moved on, and while there is still a need for shell accounts they are mostly in niche areas and not in general purpose computing.
However, there is a perception that universities should have a general purpose login server providing shell accounts. Or sometimes two, one for staff and one for students, the student one being a bit more locked down.
Usage of these services is on average very low, but they are quite often hosted on individual boxes, often because that's how it's always been done but sometimes also because the operating system provided was not readily virtualisable. And as the boxes were small and relatively cheap, there wasn't a great imperative to do anything about them.
Now in these straitened times, rack space is a precious commodity as is the power consumed by the server and the cooling. Vastly disporportionate to the number of active users. And while no one would build a virtual infrastructure just to virtualise the login servers, if you have one already the overhead of virtualising these two little used servers is minimal.
But that leaves the question of what to do about computer science. Computer Science departments typically provide a login server for undergraduates to learn to do geeky things on, but these days more and more of their work is done on workstations and the amount of command line geekery required is less and less as industry in the main wants people who know about pointy and clicky things and how to program them. And of course there's always the fear that the trainee geeks would bring down something important or overload the system in some way.
Well if your virtualisation layer is any good they should be able to crash their virtual server without breaking anything else. But strangely no one seems to have tried this. Googling doesn't bring up anything useful ...