In my ten year career, I haven't found there to be a correlation between having a degree and being a good developer. I've worked with a number of awesome people, most with degrees, some without, and plenty of bad people, most with degrees, some without. To me, a degree isn't a positive nor a negative signal for anything. You can talk about value of the intangibles outside the education component, but in my experience, a degree doesn't necessarily confer this either.
EDIT: Actually, thinking about it further, I haven't come across many bad developers without a degree. This is surely selection bias: bad devs with a degree can hide in the bowels of BigCo with HR departments who don't actually know how to hire good people, but absolutely require a degree. The bad devs without a degree can't get these cushy, hard to be fired from positions, and therefore don't last very long and probably find another line of work.
It depends on the software development project. I've worked with web devs who didn't know what a finite state machine was and did fine. Right now I work at a research institution crunching genomes. Not knowing the basics that a CS degree can give you will not work in this environment.
That's not to say that you can't get these skills outside of school but I think you get a better rounding of skills in school than out in the field. I've met more devs who didn't go to school that can't work on really difficult problems than the ones who did.
In my experience there is no direct correlation between a developer being good or bad based on whether they had a degree or not. However, what I did find was that someone who had completed their undergrad is generally capable of thinking at a higher level and can work through harder problems. IMHO, a University shouldn't be about training students to go into the workforce but to teach them how to effectively think and solve problems, regardless of discipline.
Why? It's a pretty simple system - elementary, middle school, and high school are about laying the knowledge foundation for critical thinking. University (grad school really) is about actually practicing that.
You need a body of generally accepted knowledge to actually be a critical thinker. Most people I meet don't lack the critical thinking, they lack the body of knowledge.
I generally agree with that statement but I wasn't making any presumptions only stating my observations. College is not critical to developing higher critical thinking but it certainly doesn't hurt.
I was a bad dev without a degree in the bowels of a medium-sized company (1000 people or so?). It was pretty cushy. I was really terrible. For three years. I think I'm much less bad now.
EDIT: Actually, thinking about it further, I haven't come across many bad developers without a degree. This is surely selection bias: bad devs with a degree can hide in the bowels of BigCo with HR departments who don't actually know how to hire good people, but absolutely require a degree. The bad devs without a degree can't get these cushy, hard to be fired from positions, and therefore don't last very long and probably find another line of work.