I lived on campus, but college was 4 hrs from my home so it was a no-brainer. Also, it was a strict religious college so we didn't have all that much fun.
I LOL at the friend's suggestion that the OP buy a house for the college student. I have heard of people doing this, but they are only the most wealthy, IIRC. Most of us are trying to make it month-to-month, so this is a totally foreign idea. As for housing going up in value, well, that is a real gamble nowadays. Nothing's a guarantee anymore.
My son lived at home for his first 2.5 yrs of college. It made it much more affordable, and he didn't miss out on anything. He still had a great social life. A few months ago, at age 21, he got his first apt with 2 friends. I am really proud of him; he's learning how to budget and dealing with adult responsibilities. And he, personally, didn't need a dorm room to get to that place.
Nothing wrong with living on campus. It's not a black/white thing, but the intrusiveness of these friends is astounding.