I've been told several times that things like _class_ and _classmate_ don't
have non-loan words (I don't know what those are called) associated with them
in Japanese. This seems ludicrous to me, as the ideas _must_ have existed
since well before the loan words were ever heard. So what causes loan words
such as クラス to become so popular?
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loanwords
What causes loan words to displace native words for existing concepts?
For a partial answer to your question, truly native Japanese words are called
[大和言葉]{やまとことば} or [和語]{わご}. Japanese words imported from China are called
[漢語]{かんご}. Just for reference, imported words are [外来語]{がいらいご}. When English
is tortured and used in ways we don't use it English, it is called
[和製英語]{わせいえいご}. (Two examples, (1) メークする = "to do make up" -- leads to
Japanese people using it as a verb when they try to speak English. (2) NG =
"no good" -- but used in ways I've never heard a native speaker use it)

The generic question about displacement is far too broad to answer
meaningfully. There can be a lot of reasons -- perception that the English-
derived word is cooler. Distate for a rare Japanese word or imported Chinese
word due to obscurity of its kanji or negative aged associations.... but

In answer to your specific question about _class_ and _classmate_ , the modern
Japanese education system only came into existence in the 19th century. So
most of the terms for classes, etc., were manufactured or readopted then from
older concepts. The education system was reformed again after WW2 as well.
Also, the Japanese university system shifted from imitating a German model to
an American model. (e.g., doctorates used to be granted as honorary lifetime
achievements around age 60 rather than being a basic pre-requisite for
university teaching). So at least at the college level, "class" better fits in
their thinking what is happening than 授業. So to put it another way, they use
class because that's the concept they have of what they are doing.

I hear classmate and [同級生]{どうきゅうせい} about as frequently but with different
emphases in purpose.
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answer
Actually there are several English-origin words that effectively took the
place of traditional Japanese words in the last 100 years or so. (Hereafter,
_traditional_ words mean both 漢語 and 和語—whatever that can safely be written in
hiragana and/or kanji)

For example, traditional Japanese words such as 暦【こよみ】, 匙【さじ】 and 厠【かわや】 are
very rarely used in daily conversations today. Instead, we use カレンダー, スプーン,
and トイレ, respectively, some of which are even longer and more difficult to
pronounce than the original words. Of course the concepts of those words are
universal.

One cause for this is probably related to the Japanese education system. Those
kanjis are a bit complicated and not listed in
[教育漢字](http://ja.wikipedia.org/wiki/%E5%AD%A6%E5%B9%B4%E5%88%A5%E6%BC%A2%E5%AD%97%E9%85%8D%E5%BD%93%E8%A1%A8),
and not taught in elementary schools. Two of them are even not in 常用漢字表, so
many Japanese grow up without learning how to write them. Gradually over time,
such situation can make people hesitant to use traditional words, and use
English-origin alternatives.

That said, I doubt クラス replaced any Japanese traditional words. The word クラス
has several meanings, but generally it can safely be translated into
traditional Japanese words which are still in use today , such as 学級【がっきゅう】,
組【くみ】, 階級【かいきゅう】, or 授業【じゅぎょう】.
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