You state that you are surprised that a school with good graduates has incompetent students, which implies that you wouldn't be surprised if a "bad school" had incompetent students.

However, that logic implies that San Jose State has a lot of selectivity in admissions, which it does not: http://en.wikipedia.org/wiki/San_Jose_State_University

It accepts over 60% of applicants. And frankly, a mark of a most useful school is one that isn't too selective in admissions and can churn out good graduates.