This one always makes me raise an eyebrow too. My experience at university was that students who didn't teach themselves anything didn't really succeed in class either.
I interviewed dozens upon dozens of candidates who couldn't describe to me the underlying data structure for a hash table, all with degrees from reputable schools. This was at Amazon of all places, where they did a decent job of filtering before they even got to me.
Don't even get me started on post-grad degrees. Those that have only PhD's or Masters in CS have been especially bad in my experience.
Passing a course, even doing well, is a very different thing than actually internalizing the material.
They may not be good in work environment doing some random UI work, it would turn their brains to mash.
When all you have is a PhD, everything looks like a nail.
Seconding your view on reality. I've only met one programmer with a masters / doctorate that knew what he was doing. The rest -- close to a dozen of 'em -- spent all their time trying to shoe-horn any project they were working on into their thesis.