Yes, college is over-hyped, yes we're in tuition bubble not unlike the housing bubble from not-so-distant past but if most of the crop has college education and you're interested in hiring the cream of the crop, requiring a college degree is given.
I will agree with you that this is how many hiring managers think. I happen to know counterexamples (people who declined to finish college degree programs even though they were admitted to college on financial terms affordable with their family resources) who have nonetheless obtained paying work based on college-graduate-level skills they developed despite lack of a degree. But you correctly state the general state of mind of hiring managers.
That said, the general state of mind of hiring managers is wrong. Preferring people with degrees to people who lack degrees is less supported by research than quite a few other hiring criteria. I last posted my FAQ for Hacker News on company hiring procedures
http://news.ycombinator.com/item?id=4270768
seven days ago, so rather than repeat all those keystrokes here, allow me to say that hiring managers have more reliable criteria to look at for hiring job applicants than college degrees or any other kind of biographical data about the applicants. Check the FAQ
http://news.ycombinator.com/item?id=4270768
for more details.
However, college degrees do have some advantages:
From the POV of hiree: we recruit on college campuses because that's the only place you find any significant population of qualified people who don't already have full-time jobs.
From the POV of hirer: GMA tests aren't allowed, but when hiring programmers, a CS general knowledge test is, and when comparing dozens of people who all went through exactly the same CS program, it's a pretty darn good proxy for a GMA test.
A degree really does not tell you anything useful. Unless a candidate has advanced degrees, I almost never mention education in interviews because I really don't care about it. It is not a reliable metric of anything, really.