While futons are a really popular alternative, I personally don't like them because I find them very uncomfortable to sit on. We just spent 4 days away at the cutest little lake cottage last month.
The only living room seating was a futon chair and futon sofa. It was impossible to get comfortable bec we had to lean so far back to sit in them. I think the cheaper futons are even more uncomfortable bec of the thin cushioning.
Since it's your daughter's 1st apartment, I would look in the paper or check out yard sales for a used sofa.
I know it seems a little icky to think of used upholstery, but you can always get it cleaned or cover it with a cheap slipcover.
People who are moving often need to get rid of things in a hurry and will sell real cheap. I also often see ads from people who just want to change their decor. Because they've lost interest in their old decor, their mindset is often to sell it cheap bec they just don't value it any more. Not because there is anything wrong with it. You can often find a sofa and chair set that won't cost hardly anything from sellers like that.
This is a good time to start looking at yard sales.
Donna