based on the cost of producing custom items, processing individual payments, shipping items to individual buyers, customer service and all the rest, I think CafePress is pretty reasonable.
You can probably find cheaper places to produce specific goods, like only stickers, or only t-shirts, but they probably won't offer the "free online store" and fulfillment capabilities. Plus with the other guys, you end up tying up a lot of money in inventory (you want shirts for $5 each? you gotta buy 1000 of them).
There might be someone knocking off CafePress' business model, and you might shave a few percentage points off, but then you risk going with the "offbrand" and who knows what you'll actually get in terms of quality or delivery.
If you buy 15 or more of most items, you'll get 35% off. That's a pretty generous discount, but they all have to ship to the same place. Good for clubs or teams or whatever, but not so good otherwise.
http://www.cafepress.com/cp/info/help/bulk_cb.aspxAlso, if you're going to use a college's name or team names, watch your step. They have lawyers to get all up in your grill.
Good luck with your venture.