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Well, there are plenty of living options in downtown Austin, but rent is mostly expensive there. If you want one of the nicer, new buildings downtown it is about $2/sq ft right now.
If you want to be close to downtown, but in a more neighborhod situation, check out:
Clarksville (this is my favorite area)
Deep Eddy
Travis Heights
SoCo
Zilker park area
Unfortunately, it will be hard to find a loft in any of the neighborhoods outlined above, but I'm sure a few exist. For a bit cheaper you can go to East Austin (east of 35) which is close to downtown. This area is still transitional, but they are building lots of new lofts that will be cheaper to rent than downtown.
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