[PHP] - Storing user submitted images... Multiple folders?

I have a need to store lots of small user submitted images in a project I’m working on. My question is, is it a bad idea to store them in multiple folders for faster retrieval (or some other reason so there’s not 50 bazillion files in one folder)? If I were to do this, I’m thinking that I would have to store the name of the folder in the DB.

The user base for the site I’m working on will be college students, so a pretty logical division for the folders would be to store them by school. So an example of a directory tree might be…

user_images
|
|_MIT
|
|_UCLA
|
|_UMiami

…and in the DB, I would just store the name of the folder, and not the full path. There’s a slight kink though. The system I’m using (that bwh2 suggested to me) involves storing the md5 of the image to prevent two people from uploading duplicate images. This would break that a little bit. People from the same school would not be able to upload the same image, but people from two different schools would, thus taking up precious storage space. Is there a better way?