Great dorm/apartment design IS possible, even without paint, nails, and extra money! Here are some quick tips to get you started:
Whatever size living space you're sharing, draw up some room plans before starting on any space makeovers. Sketch it out on a scrap piece of paper, talk over what colors you want to use, where you want furniture placed--everything and anything. Respect your roomie(s)' need for adequate space and all will be well!
Get creative when you arrange the furniture, especially in a tiny dorm room. In my sophomore year, my roomie and I did a technique called "L-ing" the beds--we adjusted one dorm bed as high as it could go on its posts, and maneuvered the head of that bed over the foot of the other bed, which was adjusted as low as it could go, forming an L in one corner of the room. If your dorm beds can do this, and you and your roomie are both happy with this, this saves a lot of space.
Many of my friends adjusted their beds to the highest setting for another reason--underbed storage. I knew one girl who actually managed to fit two small plastic storage cabinets AND her mini-fridge under her bed! And if you can't adjust your bed, bed risers are a great alternative.
Further maximize space by simply stacking items, getting pre-made shelving units, or DIYing some shelving units out of whatever you have.
This example is "vertical space" taken to the extreme, but it's doable--and sometimes necessary, if your dorm is very tiny!