By Kathleen Kingsbury

BOSTON (Reuters) - If you thought four years at Princeton would leave you saddled with more debt than the University of Michigan, think again.

Where you attend college can significantly impact how much you owe when you leave school. Thanks to generous financial aid policies and large endowments, students may find that an Ivy League degree, for example, often requires less borrowing than a degree from many much less expensive state schools.

To demonstrate these differences, Reuters gathered research on the average student debt for the class of 2011 - the most recent data available - at 25 private and public universities and liberal arts colleges with top rankings from U.S. News and World Report's annual survey. (To see the graphic click: https://link.reuters.com/kuf28s )

These schools, among the most elite and expensive in the country, also have instituted in the last several years some of the most generous financial aid policies. On average, 53 percent of students at the surveyed schools received financial aid, and at least half of students at most of the institutions graduated debt-free. Yet University of Michigan graduates owed, on average, more than $27,000, compared with an average for Princeton University graduate of only $5,000.

And the much higher debt levels at Michigan come even though costs there for in-state students are less than half the cost of attending Princeton - an estimated $25,204 for incoming freshman at Michigan for tuition, room and board, compared with $54,780 at Princeton.

The average debt at Michigan is calculated to include both in-state and out-of-state graduates; for the latter group, costs for incoming freshman almost rival Princeton, at an estimated $50,352.

Seventy-four schools nationwide, both public and private, have eliminated loans from their financial aid packages for at least some students, according to FinAid.org. The California Institute of Technology, known as Caltech, North Carolina's Davidson College and University of Washington are just a few examples.

Others, such as Harvard, Stanford and Berkeley, have capped contributions for students from low- and middle-income families. As of next fall, for instance, Harvard students with a family income of less than $65,000 will pay nothing to attend, and those with incomes under $150,000 will pay 10 percent of the total cost of tuition, room, board and fees - or less.

"Our commitment is not to make education free, but to make it affordable," says Adam Falk, president of Williams College, which whenever possible provides students who qualify for financial aid with grants or scholarships rather than loans.

Students at no-loan colleges still can, and often do, borrow money to help cover the portion of costs that the institutions determine should be borne by their families. At Pomona College, for instance, the average student debt is slightly more than $10,000, and 53 percent of students graduated with loans. The University of North Carolina, on the other hand, also had one of the lowest debt burdens, $15,472, with 65 percent of students graduating debt-free.

Eliminating loans isn't an option at most public universities. Substantial state funding cuts are forcing public schools to depend more heavily on tuition payments to cover operating costs.

"We just don't have the fiscal means to eliminate debt," says Susan Fischer, financial aid director at the University of Wisconsin-Madison, where students graduated with an average debt of $24,140 in 2011.

Two-thirds of all students in 2010 borrowed money to pay for college, for an average debt load of $25,000, according to the nonprofit Institute for College Access & Success.

One reason - the average tuition and fees at private four-year colleges rose 28 percent in the last five years, according to the nonprofit College Board; the increase was 41 percent for in-state tuition at public schools.

California alone - which educates about 10 percent of all full-time U.S. college students - increased tuition and fees at state schools by 21 percent in 2011 at its four-year institutions and by 37 percent at two-year colleges.

With the weak job market, the prospects for paying back loans are challenging for recent grads. One statistic grabbing headlines is that total outstanding student loan debt in the U.S. now tops $1 trillion, exceeding even credit card debt.

One yardstick for how much debt students can handle: Borrow no more over four years than what you'll earn the first year out of college. That can require rigorous budgeting and tough decisions, yet college administrators believe loans help make students feel more responsibility for their education.

"Students and families need to be prepared to make an investment," Falks says.

Indeed, one take away from the Reuters' survey - some debt is nearly unavoidable in higher education today. Despite the generosity of elite schools, today's student debt burden will undoubtedly impact graduates' - and perhaps the nation's - future opportunities. "We're talking about the generation who will hopefully steady our economy," says Ronald Johnson, financial aid director at UCLA, where students graduated with average debt of $18,203 in 2011. "And we've tied one hand behind their back as we send them off into the world.

(Editing by Lauren Young, Jilian Mincer, Leslie Adler)