Yes, he's being a *complete* prick.
The 4th room is functionally large enough for studying, which is all that's needed to shoot down his argument. (And since when did Uni students spend much of their time studying anyway?
)
I'm also less than convinced that work placement = absolute zero study time anyway. Depends on the placement I suppose.
In any case, there is absolutely no way in hell it's reasonable for him to *expect* you to sacrifice for *absolutely no* compensation. Small room should definitely be cheaper. How much cheaper? Well, that's really up to you. If there's a figure you'd be happy to voluntarily take the room for, suggest it. If not everybody agrees or you decide you really don't voluntarily want the room no matter how cheap, then you'll just have to draw lots.
Alternatively, how about agreeing to each have the small room an equal part of the year? I did this once (although it was easier since we had 2 medium rooms, 1 big, 1 small, so 2 of us agreed to split the big/small)