It is unfortunate that you had a hard drive issue just outside of your base 1-Year warranty period. I would mention that hard drives are complex and fine-tuned devices that are often listed as a culprit among the low rate of failures with all brands of computers sold today. I have seen hard drives fail within the first few weeks and others last for many years. It seems that our technicians did try to assist you outside of the warranty period and naturally, any parts or services beyond that would incur some sort of cost. Dell does offer extended warranties for up to 4 years from the date of purchase, for our systems as well.
If it were me, since the Dell technicians confirmed your suspicions about a bad drive, I would purchase my own hard drive and use the free articles and manuals from support.dell.com and resources on the Dell Community Forums for advice/guidance on how to setup this drive in the system. I assume that you were making regular backups and from these and therefore you could transfer your personal data over to the new drive in no time, using the Dell DataSafe software.
How to use DataSafe Backups - http://dell.to/OFNY7N
Dell Community Forums - http://dell.to/aHPRcX