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Cheap backpacks can be made, but I don't recommend it. Unless you are extremely skilled at sewing, it isn't likely to come out like you want. Also, even if you are an expert, it will probably take less of your time to pick up an extra day at work and buy a pack with the earnings.
On the other hand, if you have an old backpack frame, you can make a cheap backpack with it. Remove the old pack, and tie a plain nylon duffel bag to it firmly, with the zipper facing out. Small bungee cords will work for attaching it too. I did this using an old aluminum frame that still had straps and a waist belt, and for the cost of a $15 duffel bag, I had an external-frame backpack that not only held a lot, but weighed just two pounds.
Buying Cheap Backpacks
There are several ways to buy cheap backpacks. The most obvious is to just wait for a good sale. A quicker way is to shop for a used pack online. Try Ebay.com, or go to a backpacking or other outdoor forum that allows people to sell their gear, like whiteblaze.net. The forums are nice, because you can easily ask questions about the pack.
You can also buy used backpacks cheap at rummage sales. Watch the ads for any mention of outdoor gear, and call to see if they have a backpack you might want. You may be able to buy it before the sale starts. Otherwise, start shopping early, and negotiate a bit. I recently sold a beautiful Kelty frame-pack for $15 at a garage sale.
Thrift stores sometimes have cheap backpacks. More often they have day packs, but you never know. I have seen big old frame packs that were rough at thrift shops, and it occurred to me that for a few dollars I could just toss the pack, and use the frame with a duffel bag, as described above.
Another way to keep the cost down is to go light. The lightweight backpacks, unlike other lightweight gear, are always cheaper than the big packs. If you have been thinking about lightening the load, you can save money too. Ultralight backpacks are usually under two pounds and frame-less. You'll probably use a sleeping pad as a "frame" of sorts. The good news is that they are often on sale for under $100.
Go-Lite has several packs that are near $100, and sometimes on sale for less than that. The list price on the Granite Gear Virga Ultra Light Packer may still be under $100, and I have seen it on sale for under $80. It also weighs only 21 ounces, a bonus for me, as I like the idea of light AND cheap backpacks.
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