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 cool 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 even if you can't adjust your bed, bed risers are a great alternative.
This is "vertical space" taken to the extreme, but it's doable--and sometimes necessary, if your dorm is tiny tiny tiny!
Lastly, anything like floor lamps, square tall shelving, and small display tables can fit into otherwise-unused corners.
In a tiny dorm or apartment, especially if you're sharing it with someone else, colors and patterns can get way too much very quickly. Plus, not everyone has a fantastic budget for decorating anyway!
Instead of trying to find big items of a particular color or pattern, go with small items--they cost less, are more flexible to work with in small spaces, and won't detract from each other as much. Small rugs, vases, picture frames, and bulletin boards are just a starting point!
As for your larger items, like your bedding or furniture pieces, keep those pieces more neutral and solid-color. That way, you can change up decor more easily without spending a whole lot.
Dressers, shelving units, and desks with carrols work great to help visually separate the room into activity areas. You can put your desk and dresser back-to-back, perpendicular to the wall, to create a delineation between your study area and bed area, for instance.
You can find a lot of inexpensive room furnishings at big-box stores like Wal-Mart and Target, and also at home stores like Bed Bath and Beyond. I also like to look around on the internet at the following sites: