As a teacher, I encounter this more frequently with piano students than guitar students (but to some extent with them too). This is usually propagated by a parent believing that their child should only be playing pieces by what they consider "real" composers (one of the maybe five composers whose name they recognize). Often, the parent had taken piano lessons previously and remembered playing "fur elise" (or at least part of it).
The real issue here is that learning only these "classics" does not allow for development of skills. Often, I encounter this as a complaint about a method book. While I don't feel that any method book I've encountered is perfect, I've never run across one that didn't seem to be put together meticulously to develop student growth. Occasionally, there is a composition by the author or editor of the method. The reason for this is not to stroke the go of the author, but to allow for a student to develop a singular skill without extraneous material. In many cases, either such a piece did not exist, or was not in the public domain to be used in the book and keep the cost (and ultimately, your price) down.
Studies of Michael Aaron's "Swing Song" is one of the many stepping stones that may one day get you to successfully perform Rachmaninoff's "Rhapsody on a Theme of Paganini.
In this situation, you teacher is supposed to be the expert. He or she has dedicated their lives to the study of music. If you truly believe that your music teacher is not providing a quality education, you should first speak with them about the pedagogical value of what they are teaching, and if you still feel it's insufficient, find a new teacher.