Apple has created instructions on how to setup a free iTunes account without requiring the use of a credit card. You can accomplish this right on the iPad (look at the second section of the page).
I have also created step by step instructions with screenshots. Take a look below:
1. Open the "Settings" app
2. Select "Store" on the left and, if you see an email address already in the "Apple ID" section, tap it. If not, skip to step 4
3. Tap "Sign Out"
4. Open the "App Store" app
5. Find a free app and tap the "Free" button
6. Tap the "Install app" button
7. Tap "Create New Apple ID"
8. Tap "Next"
9. Scroll down to the bottom of the agreement and tap "Agree"
10. Tap "Agree" again
11. Enter your BSD email address and choose a password. Note Apple's requirements for your password
12. Scroll down and choose three security questions and answers
13. Scroll down and enter a "Date of Birth" and then tap "Next"
14. Tap "None"
15. Even though you are creating the account without choosing a credit card, Apple still requires you to enter your name, address and phone number. You can always enter the address and phone number of your school. Scroll down and enter your name, address and phone number, then tap "Next"
16. An email will be sent to the email address you entered earlier in the process. Tap "Done"
17. Using a computer (it's easier), go to your BSD email and look for the verification email from Apple. Follow the directions to verify your new Apple ID/iTunes account.
18. Once you've successfully verified your Apple ID/iTunes account, open the "Settings" app
19. Select "Store" on the left and tap "Sign In"
20. Tap "Use Existing Apple ID"
21. Enter your new Apple ID and password
Now, you are all set to use your new iTunes account/Apple ID to find and install free apps from the App Store on the iPad/iphone/ipod
