[throwawayoverhe]

> At what point will firms rank new grad candidates inversely proportional to the prestige of their university?

Never.

> Prestigious universities equate with more expensive candidates.

But that doesn't mean you rank those people lower. It means you offer them the job at the budgeted salary. If they don't accept the job offer at the salary range you've budgeted for the position, then you move on to the next candidate.

This might make less sense if there's a strong opportunity cost (i.e., missing a candidate because they already accepted a job), but that's not typically the case for new grads.