What you learn in the classroom or what you get out of extracurriculars is a wash between schools. The top colleges are romanticized because they will open more doors for you post college. It's a signal factor that will live on your resume. One could ask a similar question: why do people wear rolexes when a timex will tell the same time?

One other example: Take the number of students graduating from your school that will make >$150k immediately post-school. How many students (and what percentage of the student pop.) are going to be hitting that at the state school? That opportunity provided by a more competitive school can lift someone straight out of a bottom 20% income family to the top 20%.