I always try to get the designs as close to the stripe as I can. I have also seen people embroidery over the stripe, treating it like it wasn't even there, and I like the way that looks too so I do that sometimes.
Conside how it will look folded over the towel bar, sometimes that helps.

I go above the stripe if it has one for bath and hand size
Whether or not the towel has a stripe I usually put the center of the design 8 inches from the bottom edge of the towel. On really huge towels I may go a bit higher like 11 inches.

Some towels have the stripe higher/lower, if you want to use the stripe as a guide instead then the center of the design should be about 4 inches from the top edge of the stripe.

I usually go about an 1 inch from the strip up to 2 inches if it is big towel. Hope that helps. Suzanne

Good luck with your towel decorating; I have a project in the works, also.
Hugs,
Jacqueline

well i like to write on the stripe my name or whoevers name and put the design just above it hugs carolyn

i think it is a personal choice myself i like it on the stripe and the picture sometimes above sometimes to the right depends on the picture...good luck i am sure it will be wonderful....soozie

Thank all of you for your input.I stitched a bath (on an old towel) and the BOTTOM of the design, ended up being 4" from the Stripe. If I hang it with no other towel, would be ok, but to hang with a hand towel I think the hand would cover up the design. This I did b/4 I got info from you.Just glad I did on an old towel. Thank everyone so much for helping me-T