I don't know what you're accustomed to, but if you're not used to traffic, you're in for a surprise in Austin. It's a great place, with tons to do and very progressive-friendly, but you can spend hours in traffic if you're not careful. I'd recommend finding a place close to a UT Shuttle stop (
http://www.capmetro.org/gismaps/utshuttles.html) and maybe taking the free service to campus -- but that can be a pain sometimes, especially if you're school is in a remote place on campus.
The Far West area in the northwest part of town (north of 2222, west of Loop 1/MoPac) is pretty nice and relatively affordable. Definitely not as hip and trendy as South or East Austin, but a nice area. The only thing I would caution about living in South Austin is that traffic on I-35, Congress or MoPac can really back up trying to cross the river.
CapMetro also just launched its light rail system, but its service is limited -- only goes a few places, and basically just operates during rush hour in the morning and evening.