Your question is hard to answer for a Grad Student. Grad Students have access to apartments that are clean and quiet and they don't rent to undergrads in order to keep them clean and quiet.
In town vs out of town.
In town allows much easier access to the many opportunities taking place on campus and there are many. Think music, arts, poetry, lectures, etc and with the size of Penn State the volume will boggle you. You are also right down town and State College is a fun college town. Can't go wrong except for the price.
Out of town will require some from of transportation to get to campus such as car, bike, bus. Staying late is problematic, especially in the winter. Her friends will want to go into town and that can be a problem getting back. However, prices are generally 50% less than in town and many are very nice and have extras like gym's, hot tubs, pools, etc. But, it not really much of a college feel.
My suggestion is that you two look at a couple of graduate apartments in town and a few apartments out North Atherton to get a sense of the value, distance, convenience, etc. Early next week ask if the University if any Graduate Housing is available for Fall Semester. If so, this will give her an opportunity to become familiar with campus and town before signing any lease. Also, I suspect that the Law School maintains a facebook page for each of the classes and that is how she may find a roommate to share expenses. It is also a good way to start making friends.
Good luck.
