Having a degree doesn't necessarily mean you have a clue about the architecture of software, how to separate data from the GUI, or even have a full grasp of a simple language. I do not have a degree but having worked with degree holders who came to the company fresh from University, I can safely say that some of them hadn't a clue about how to write software (this was C++).

The skills required for writing software only truly come about if set your own project at home and work through it and write it fully.

Well, it's a problem with the degree as a signaling device and a problem with the interview process if it repeatedly produces false negatives of a similar type.