The argument is that if you're hiring a student from Stanford you can assume some baseline level of competence (only approximately true, I'd bet). If you're hiring from elsewhere, maybe you have to interview 10 people to find someone with similar knowledge/skill/misc. It's a bigger time investment in the hiring search, and gauging technical skill in a job interview is still an unsolved problem.

If you find an efficient + effective way to compare all the applicants, that would make it easier to put everyone on the same footing regardless of school. But that's hard to do and it's easy to be risk averse and just hire the Harvard grad.

A Harvard grad presumably costs you more, but they keep doing it that way because 1) it's simple, and 2) if you try to hire more broadly but misjudge and make a bad hire, that's potentially much more expensive.