Daniel Schwartz could have attended an Ivy League school if he wanted to. He just doesn't see the value.

Mr. Schwartz, 18 years old, was accepted at Cornell University but enrolled instead at City University of New York's Macaulay Honors College, which is free.

Mr. Schwartz says his family could have afforded Cornell's tuition, with help from scholarships and loans. But he wants to be a doctor and thinks medical school, which could easily cost upward of $45,000 a year for a private institution, is a more important investment. It wasn't "worth it to spend $50,000-plus a year for a bachelor's degree," he says.

Robert Pizzo WSJ Careers on Facebook Weigh in: Is an Ivy League Degree Worth It?

As student-loan default rates climb and college graduates fail to land jobs, an increasing number of students are betting they can get just as far with a degree from a less-expensive school as they can with a diploma from an elite school—without having to take on debt.

More students are choosing lower-cost public colleges or commuting to schools from home to save on housing expenses. Twenty-two percent of students from families with annual household incomes above $100,000 attended public, two-year schools in the 2010-2011 academic year, up from 12% the previous year, according to a report from student-loan company Sallie Mae.

Natasha Pearson, 19, attends Hunter College in New York City. She turned down an offer from Boston College after the school said her family would need to pitch in $30,000 annually. Bryan Derballa for The Wall Street Journal

Such choices meant families across all income brackets spent 9% less—an average of $21,889 in cash, loans, scholarships and other methods—on college in 2010-11 than in the previous year, according to the report. High-income families cut their college spending by 18%, to $25,760. The report, which is released annually, was based on a survey of about 1,600 students and parents.

The approach has risks. Top-tier colleges tend to attract recruiting visits from companies that have stopped visiting elsewhere. A diploma from an elite school can look better to many recruiters and graduate schools, as well. And overcrowding at state schools means students could be locked out of required courses and have difficulty completing their degrees in four years.

Mr. Schwartz started at the Macaulay Honors program at Queens College this fall with "nagging" disappointment but has come to terms with his decision.

"I have to grow up. I have to incorporate what I want and what I can have," he says. "Even though people say money shouldn't be everything, in this situation, money was the most important thing."

He says he had grown enamored with the "prestige" of an Ivy League degree. His teachers cited the networking opportunities and academic rigor. It didn't help that his father attended Princeton University and his uncle, Columbia University.

"I thought that the Ivy League title would really, really boost my chances of getting into a good med school," Mr. Schwartz says. Now, he is aiming for top grades at Macaulay to remain competitive with Ivy League candidates.

There is little question that having a college degree gives candidates an edge in the job market. The unemployment rate for people with a bachelor's degree was 4.9% last month, compared with 10.5% for high-school graduates with no degree, according to the Bureau of Labor Statistics.

But a degree from a private college also is expensive and piles on debt. The average debt load for students who took out loans hit a record $27,200 for the class that graduated this year, says Mark Kantrowitz, publisher of student-aid websites Fastweb.com and FinAid.org. That comes as general per capita debt reached $47,260 in the second quarter, a figure that has been dropping in recent years, according to the Federal Reserve Bank of New York.

The U.S. jobs recovery has been the slowest since the Great Depression. Eight million jobs were lost during the last recession, but after more than a year of steady growth, we're still more than six million in the hole. WSJ's Phil Izzo explains

Jesse Yeh, a 20-year-old California resident, chose the University of California at Berkeley over Stanford University. Tuition at Berkeley, a state school, is about $14,460 for in-state students. At Stanford, it's $40,050.

Now he worries about graduating on time, having been locked out of some overcrowded courses, including Spanish and a public-policy elective. Berkeley says 71% of students who entered in 2006, the latest period available, graduated within four years. At Stanford, that number is closer to 80%.

Attending a private university still can pay off. Schools with large endowments have beefed up their aid programs in recent years, which can make them less expensive than their public, cash-strapped counterparts. Brown University, for example, offers grants instead of loans for students whose families earn less than $100,000 a year. Harvard College doesn't expect any contribution from families with annual incomes below $60,000.

But Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers University, says graduate outcomes often have more to do with major and how a student takes advantage of networking and internship opportunities, than with school choice.

Natasha Pearson, 19, questions her decision to attend the City University of New York's Hunter College. She says she turned down an offer from Boston College after the school said her family would need to pitch in $30,000 annually.

She says there's a "wide variety" of academic ability among her Hunter classmates and that many of her courses are taught by graduate students, rather than by full professors.

"I can't help but wonder, had I gone to BC, where that could have taken me," she says.

Write to Melissa Korn at melissa.korn@wsj.com