These schools always served a great purpose. today, not so much. You have to have the best 'name school' on your resume. If that isn't Harvard/Yale/Princeton, you hope that it is ND/NW/Michigan/BC. If not those, its PSU/tOSU/MSU. Failing all that, it is Edinboro/Cal(PA)/IndianaPA. It cost about $25k per year to go to Edinboro, $36k to go to PSU. The name "PSU" means so much more than Edinboro. So what do you do? You get a readily available student loan and graduate with a big debt.
Not sure this is true, certainly not as a blanket statement. In certain fields, sure, there might be strands of this sort of thinking (engineering, etc), but it has a lot more to do with the industry. I worked for a major Fortune 500 company in my previous job/department, and we had graduates from Kutztown, Misercorida, Lehigh, Cornell, PSU and Rowan as direct reports. The biggest distinguishing factor in success seemed to be how much/where they had gotten internship experience and what level of technical skill they possessed. The core knowledge set wasn't fundamentally different between the lot of them, though the two from Lehigh and PSU did seem to come in with better internship experience.
The other core issue that these schools have is they have such a limited program offering, they lose a lot of students to attrition and transfer which drives down their grad rates. There doesn't need to be near the level of program overlap between these institutions. One of my grad degrees was at Bloomsburg, and when I was there, they were losing bio majors like crazy to CC's and branch campuses because students could do the program faster and with less debt. They were smart enough to re-work the program and begin offering Allied Health Sciences to stop the bleeding. It worked, but there's too much of this continually happening at PSAC schools.
The other big hang-up is APSCUF. They are the biggest group of hypocrites in the entire world. They are essentially a cartel holding the state system hostage. Students/Administrator/Staff are continually paying a bigger portion of the burden for insurance, facilities and other expenses whereas the Faculty Union is exempt. And every couple years they go on strike and sell the students on some sob story to save the teachers, but in reality they just want to shift the fiscal responsibility onto everyone else. The "I would gladly pay more for so and so" crowd never seems to want to pay more.