I think you grossly overestimate the percentage of candidates at lower tier schools who would be qualified to pass a Jane Street (or really any HFT firm) interview. Even at the top schools the pass rate is incredibly low. In expectation you would be getting probably <5% of your new graduate/intern class from the entire bottom 80% of schools.
The quality level drops off very sharply after you go below the top 20-30 CS schools. It's just a matter of limited resources for recruiting. The common path taken by people who go to "lesser" schools is to grind really hard to get into a good MS or PhD program and then go to these firms.
to be upfront, I don't buy that a company with such large resources couldn't recruit from a larger pool of school. I'm also not under any illusion about the caliber of student at upper vs lower ranked schools, I see it as a matter of equity and meritocracy
Why not? Having a company with multiple billions of dollars doesn't in itself produce any returns without high quality labor to work it, especially in competition against other such multi-billion dollar companies. It might not fail this quarter or next, but inevitably they'll be chased out, if in fact the recruiting practices lead to lower productivity.
The quality level drops off very sharply after you go below the top 20-30 CS schools. It's just a matter of limited resources for recruiting. The common path taken by people who go to "lesser" schools is to grind really hard to get into a good MS or PhD program and then go to these firms.