I don't think it is all cost. Some of it sure- I see plenty of older Android phones. But I also see plenty of newer phones- Evo 3Ds, a Bionic, MANY Thunderbolts, etc. I have been asking my classmates why they are buying the android phones when I get a chance to small talk them and the reason I keep hearing is "I love the large screen!"
Evo 3D, Bionic, and Thunderbolts are all actually about the same cost as an iPhone 4 now on the market... so there's still a part about cost there.
If I were to have no knowledge whatsoever about smartphone, and I hear... that the iPhone 4 has a single-core processor, last year hardwares, no 4G, etc... and it costs the same as the other guys who have dual-core processor, current bleeding edge hardware, and they all have 4G, then I'd go for the Android phones as well.
The pitch for an Android phone right now is really juicy, especially considering that the cost is about the same as a last-generation iPhone 4....
If the screen was a factor, I'd think the Dell Streak or the Galaxy S of last year wouldn't have done so poorly. And I don't doubt you have seen some Android devices around with smaller screens, so obviously that doesn't apply to everyone.
Cost is a big part in a student's life right now. I'm a student myself so I know how that feels like. If I wasn't gifted the iPhone 4 that I have now, I'd be having an Android phone myself.
Of course, that's not to say there aren't other benefits to having an Android phone, but the most immediate one that I can see right now is... they are cheap.