Don’t make a decision based on where your friends are going. In the end it will be what you’re getting out of your education. However, don’t choose the prestigious school if you think you’ll hate it there. You need to be comfortable wherever you go to school. If you think you won’t be comfortable at #2, then choose #1. But you need a better rationale to choose #1 than ‘all my friends are doing it’.
Don’t base it off your current friends. College is a fun new environment where you can meet new people and mature! Sure it’s great to know some people at college from high school, but now is the time to branch out and be yourself. If you can graduate #2 debt-free, it is definitely worth considering on a HEAVY LEVEL. Who cares if anyone you know is going to go there? I don’t know the school but if it is somewhere really good, you got in on your own merit and hard work. Maybe those close friends you know weren’t able to get in there…I don’t know your academic goals or anything like that but don’t hold yourself back by friends. If you fit at #1 better than #2, that is completely fine, but #2 basically debt free is hard to pass up.