Ivy League education: No longer worth it?

FORTUNE -- Which graduate is more attractive in today's job market? Sorry, Ivy Leaguers. This is where state schools win out.

A survey released this week bolstered the argument that the luster of private elite colleges might be fading. Under pressure to cut costs and simplify hiring efforts, U.S. companies are increasingly recruiting from large state schools over private elite institutions, according to The Wall Street Journal's survey of recruiting executives in nearly 30 industries including finance, consulting, marketing and technology.

Unlike smaller private colleges, including the Ivies, state schools have an expansive population of graduates. What's more, they're easier to tap for talent, as graduates of top public institutions tend to be among the best prepared and fit well with their corporate cultures, The Journal reports. Its survey ranked Pennsylvania State University, Texas A&M University and University of Illinois at Urbana-Champaign as top picks.

This should come as a relief to some strapped families with children weighing Stanford or UC Berkeley. College tuition has outpaced Americans' ability to pay it, The Economist reported earlier this month. Median household incomes are 6.5 times what they were 40 years ago, but the cost of attending a state school is 15 times higher for in-state students and 24 times for out-of-state students. The cost for private colleges rose by roughly the same rate or less, but that tuition remains out of reach for many families. One year at a private four-year university averaged $35,636 in 2009-10, according to the College Board. In-state tuition and fees at public four-year institutions averaged far less, at $7,020, while out-of state averaged $18,548.

The hiring uptick among state school grads will hopefully help lower default rates, which have climbed ever higher during the economic slump. Earlier this week, the Department of Education reported that graduates of private schools had a 4% default rate in 2008, up from 3.7% in the previous year. And those graduating from public colleges defaulted at a rate of 6%, an increase from 5.9%. Although state borrowers default at a higher rate, the private school default rate is growing at a much faster pace. The statistics highlight just how large of a burden even the relatively lower cost of public colleges can be.

Graduates from elite schools may argue that they're more likely to earn higher incomes upon graduation, but historical research proves that's not the case. In a study featured at the National Bureau of Economic Research by economists Alan B. Krueger and Stacy Berg Dale, selectivity of schools generally had little effect on incomes once other factors, such as SAT scores, were taken into account. In other words, students with the same test score would earn roughly the same income, regardless of the school they attended.

So if the incomes are pretty equal, and more companies are seeking talent from state schools, what good is a degree from an elite private school?

It opens doors that might not be opened by larger institutions. And that's most important for lower income students who are fortunate enough to attend Ivy League schools through scholarships and aid. Krueger and Dale's study found that while incomes stayed roughly the same regardless of your alma mater, poor students made more money after graduating from elite colleges.

Of course, many students won't get the opportunity. As the cost of college soars, the admissions process has become increasingly competitive. Applications to Harvard reached a new peak last year -- more than 30,000 applied for fewer than 2,000 spots.

The rough economy has produced a bit of good news for those angst-ridden SAT-takers today: It's okay if you don't get into Harvard. State U. is just as promising.

Update: An earlier version of this story incorrectly stated that median incomes had risen by 6.5% over 40 years, in-state tuition by 15% and out of state tuition by 24%. Those figures rose by factors of 6.5, 15, and 24.