Of COURSE we want you to enter the student design competition; we wouldn't keep talking about it if we didn't think it was awesome, and the great thing is — we'd tell you that about entering any competition. It's good for you!
But really, we're not the only ones with that position on it. Core77 came up with 5 reasons (scroll down to the 5th post) far more eloquently than we could, so we're going to just highlight them here:
Preparing your entry will force you to create a well-crafted, well-produced "piece"—with great photography and great copy. Which means it's portfolio-ready.
Even if you don't win, many competitions—especially online ones—publish dozens of notable entries. So you'll probably get some press from it, which you can screengrab and put in your portfolio next to the entry spreads.
It's not schoolwork. Many design competitions have themes that are ambitious, progressive, and challenging, so entering them will give you a great opportunity to spread your creative wings. Especially if you find that a lot of your classwork doesn't possess these characteristics, go get it across the street.
The fact that you enter design competitions sends the message that you're engaged in the design world beyond school. Which you should be.
You may just win. And then that point about printing out press clippings takes things to a whole new level. "I see that you've won or been published in 3 magazines and on 5 websites since your Junior year?" Endorsements from judges and editors may get your interviewer to think a little more seriously about you, which is the point, right?
More fantastic advice from Core77 in their Hack-2-School posts here:
Hack-2-School Dorm Room
Hack-2-School Crash Course
Hack-2-School Cheat Sheet