SJS, it is because some people are too focused on chitzonius, rather than pnimius. The RBSH doesn’t care one hoot what colors one wears, or what kind of yarmulka. It is just a status thing (albeit a fictitious status).
The only lshem shomayim is if a person thinks that he is too attractive, and is afraid of his yetzer hara so he deliberately needs to dress like a yeshivishe shlump in order to control it. Maybe there are some sincere cases like this. (I think the chassidim deliberately dress that way for this reason, so completely out of style that it keeps the yetzer hara in check.) Many others just like to follow whatever the crowd is doing, even if they have no idea why. It helps them feel like they fit in. My 4th grade daughter wanted crocks for the same reason, her friends had them. People have posted here that if one dresses differently in yeshivos, then people may call them a “Harry”. Since, of course, nobody wants to be called a Harry, obviously you will wear black and white. The Shulchan Oruch teaches us how bad it is to be a Harry, and even says that a Harry has no chelek in Olam Haba. (Hilchos Harry.)
The down side of dressing like a shlump, is that it may turn people off to yiddishkeit, and be a chillul hashem. I seem to remember that in Chofetz Chaim Yeshiva in Queens, they were very makpid to dress well, and even shaved during omer and 3 weeks on Erev Shabbos, but please do not quote me or rely on this without verifying.