MONEY College tip of the day

8 Most Common Things Students Forget to Pack

girl sitting on top of stuffed suitcase
Getty Images When you think you have everything, check the bathroom for your toothbrush.

Don't leave home without 'em.

No matter how many boxes and duffle bags you stuff, packing for college usually means forgetting something—and ending up in line at the college store or nearest Target to buy one.

So we recently surveyed some members of the National Association of College Stores, an organization that represents more than 3,000 campus retailers in the U.S. and Canada, about the kinds of things students most often leave behind.

Among the biggies:

  • Coaxial cables
  • HDMI cords
  • Phone-charging cables
  • Shower shoes
  • Surge protectors
  • Toothpaste and toothbrushes
  • Towels
  • Umbrellas

R. Todd Smith of Clayton State University in Morrow, Ga., suggested that last item, while also managing to slip in a shameless plug for buying one at the college store. “Ours are much cooler and more dependable than the umbrellas students might purchase from the well-known discount store across the street,” he said.

(In addition to Mr. Smith, special thanks to J. Bryson Baker of Oklahoma State University, Chad Schreier of Montana State University Billings, and Danielle Capstick of Assumption College in Worcester, Mass.)

For a list of things not to pack, especially if you’ll be living in campus housing, see our recent compilation of 12 Banned Items to Leave Off Your College Shopping List.

You can find more tips and tools for college-bound students and their parents at the MONEY College Planner website. And if you’re still in the process of picking a college, rather than packing for one, try our new Find Your Fit tool on for size.

MONEY College

25 Colleges That Can Land You a 6-Figure Career Without Grad School

Missouri Institute of Science & Technology, Rolla, Missouri
Sam O'Keefe—Missouri S&T Missouri Institute of Science & Technology, Rolla, Missouri

These are MONEY's most affordable colleges whose alumni report earning at least $100,000 a year, with just an undergraduate degree.

As more people earn bachelor’s degrees, workers who want an edge in the job market are increasingly investing in expensive graduate degrees. But data released today by PayScale.com reveal dozens of colleges where average mid-career alumni are earning more than $100,000 a year without the additional cost of grad school.

Building on the PayScale data, MONEY identified the 25 most affordable colleges that launch graduates into six-figure careers. While many of them aren’t exactly cheap, consider that an MBA from a top school, for example, typically costs more than $100,000. So investing in a good-value undergraduate education can save big money down the road. (Here are tips on how to find a good value college.)

Remember that these earnings numbers are averages, not predictions or guarantees. What you earn depends on the skills you develop in college, the industry you choose, and your job performance.

College PayScale’s average alumni mid-career earnings MONEY’s estimated average net price of a degree* Money overall value ranking
Missouri University of Science and Technology $102,000 $91,772 135
Virginia Military Institute $110,000 $93,957 48
Massachusetts Maritime Academy $108,000 $96,870 59
Georgia Institute of Technology $112,000 $111,093 30
Cooper Union for The Advancement of Science and Art $114,000 $113,376 9
SUNY – Maritime College $134,000 $115,746 113
University of California – San Diego $103,000 $125,593 32
Colorado School of Mines $109,000 $132,697 135
University of California – Berkeley $114,000 $133,549 9
Clarkson University $111,000 $140,258 63
Princeton University $122,000 $148,626 3
New Jersey Institute of Technology $101,000 $154,499 196
Vanderbilt University $102,000 $155,064 24
Rice University $114,000 $157,824 14
Case Western Reserve University $103,000 $160,246 135
Rose-Hulman Institute of Technology $107,000 $160,279 128
Stevens Institute of Technology $120,000 $163,317 48
Worcester Polytechnic Institute $112,000 $163,952 48
Washington and Lee University $120,000 $164,396 24
Massachusetts Institute of Technology $124,000 $166,855 3
Gettysburg College $100,000 $173,693 168
Manhattan College $112,000 $176,128 41
Stanford University $123,000 $178,731 1
Kettering University $102,000 $179,672 556
Whitman College $101,000 $180,272 246

*Net cost of a degree is MONEY’s estimate of the total cost of a degree for a freshman starting in the fall of 2015. The calculation consists of: the total estimated 2015-16 cost of attendance (in-state tuition, fees, room, board, books, transportation, etc.) minus the average amount of college-awarded grants and scholarships. That number is then multiplied by an inflation factor and the average number of semesters it typically takes students at that college to earn a bachelor’s.

For more advice on choosing college, and to create a customizable list of colleges based on criteria such as size, selectivity, and affordability, visit the new MONEY College Planner.

MONEY College

Private Colleges Are Offering Record Tuition Discounts to Win Students

hand holding chalkboard that reads: 50% off
Sarina Finkelstein (photo illustration)—Getty Images (1)

Where to find the biggest bargains.

Those scarily high tuition prices most private colleges say they charge are increasingly as make-believe as Freddy Krueger: Only 11% of freshmen paid them last year, according to a survey of private colleges released today.

The rest—89% of freshmen at private colleges—received a school grant or scholarship worth, on average, 54% of the published or “sticker” tuition, the National Association of College and University Business Officers reported. Both those numbers are all-time records.

The survey indicates that colleges eager to recruit applicants are luring students with big grants— often labeled “merit scholarships” to flatter recipients, but in reality more like the discounts off of a retailer’s price tag.

In 2013, the latest year for which data are available, most private colleges reported sticker prices for tuition and fees somewhere between $30,000 and $45,000 a year. (Room, board, books, and travel typically add another $15,000 to $20,000 to the total annual costs.)

But schools that accepted more than half of applicants charged net tuition, after scholarships were subtracted, of less than $20,000. Those that accepted less than half of their applicants charged their students an average net tuition of about $23,600

That explains why the odds are lower for getting a deal at an Ivy League college. Nearly a third of schools—mostly large, selective, wealthy universities with plenty of applicants—didn’t increase their discounts last year, NACUBO reported. The most selective colleges on MONEY’s Best Colleges list—those with admissions rates of 33% or less—gave only about half of their students grants.

But that still leaves more than 1,000 non-elite private colleges attempting to attract students with ever-bigger scholarships or discounts off their ever-higher tuition. In fact, among the 736 colleges in MONEY’s rankings, nearly 100 award a scholarship to every single freshman. Those schools accept an average of 66% of applicants.

College officials cited three key reasons for the rise in discounts.

  • Psychology. Research by Lucie Lapovsky, a former president of Mercy College in New York who now serves as a consultant to colleges, shows that at least 40% of students and parents would opt for the bragging rights they get when a school gives them a large scholarship off a high tuition, rather than a school that has lower tuition and lower aid, but similar net costs.
  • Economics. The combination of rising tuition and financial woes for the middle class mean more applicants need scholarships to afford private colleges, said Steven Klein, vice president for enrollment management at Albion College in Michigan, where 100% of freshmen received a school grant in 2012 (the latest year for which federal data are available).
  • Competition. In part because of a decline in the number of 18-year-olds, more colleges are having recruiting problems, and thus need to offer bigger discounts. About a third of the schools surveyed told NACUBO that their enrollment declined last year.

The latest numbers “provide more evidence that students and families should look beyond sticker prices,” said NACUBO President and CEO John Walda. Instead, he said, families should focus on the “net” price, which is the price they pay after grants and scholarships have been subtracted.

One unfortunate result of the growing practice of raising sticker prices and offering more aid is confusion for students and parents, Lapovsky contends. Students have to apply to colleges in the fall, without a good sense of how much the college will actually cost them. Although colleges are required to provide a net price calculator tool on their websites, Lapovsky says many are outdated or give such general estimates that they aren’t helpful.

So students typically have to wait until April to see their final offer. And because colleges demand an answer by May 1, many students have just a few short weeks to make a potentially life-changing financial decision.

In addition, Lapovsky says, the common but mistaken assumption that colleges with high tuition are “better” than those with lower tuition can lead families to make costly college choices.

In fact, MONEY has found no significant relationship between the average net price charged by the colleges in our rankings and important quality indicators such as the earnings of recent graduates.

For more advice on paying for college, and to create a customizable list of colleges based on criteria such as size, selectivity, and affordability, visit the new MONEY College Planner.

MONEY Student Loans

Should Colleges Pay for Student Loan Defaults?

538276751
DNY59—Getty Images

There is growing bipartisan support for legislation that would force colleges to pay for excessive levels of student default.

A college education does not come with a warranty. All a degree does for you, at least in theory, is open more doors of opportunity — it does not guarantee that you will get a job in your field.

However, college costs have risen sharply — over 1,100% since 1978, which is more than four times the cost increases in the Consumer Price Index (CPI). As a result, too many graduates are dealing with onerous levels of student debt, making repayment difficult if they do find a job in their chosen profession and nearly impossible if they do not.

With a tight job market and lower wages, college costs are reaching a critical mass. At what point do shrinking job opportunities make a college education not worth the costs? In the worst case scenario, continued price increases will eventually drive costs so high that graduates in critical but lower-paying jobs, such as teaching, will be unable to pay off the debts necessary to acquire their degree — and if they can, it will be at the expense of home ownership and other necessary economic drivers.

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While it is unrealistic for colleges to guarantee a job to their graduates, it is reasonable to expect colleges to consider cost control measures to make their degrees more affordable. Unfortunately, there is little economic incentive for colleges to control costs while the demand for a college education stays high.

Federal and state funding has been trimmed in recent years, but the combined input from state funding and Pell Grants is still over $115 billion annually — providing a large pool of money to colleges to help sustain higher spending.

Various legislative proposals have been floated to give colleges a financial stake in the future success of their students. One interesting proposal with bipartisan support in Washington is to force colleges to pay for excessive levels of student default.

In a way, this rule already exists within the Department of Education. If over 30% of graduates from any school default on their loans within three years after starting the repayment period, that school can be thrown out of federal loan programs. Even with this low bar, a few schools have still managed to miss the goal but are generally given a second chance.

Newer proposals to rectify the situation may be similar to the bill introduced by Sen. Elizabeth Warren (D-MA) and Sen. Jack Reed (D-RI) in 2013. Their proposal was effectively to fine colleges with default rates above 15% and force them to pay back the government 5% of the total loan amount in default. The intent is to find a way to make schools share some of the borrowing risk with their students.

The Warren-Reed bill went nowhere, but forms of this proposal are getting a new bipartisan emphasis. It is likely to be folded into reauthorization of the Higher Education Act. The chairman of the Education Committee, Republican Senator Lamar Alexander of Tennessee, reportedly backs the concept.

As with most legislation, the real trick is how to accomplish the goal without invoking the Law of Unintended Consequences. The most likely consequence is that colleges will find subtle (and possibly overt) ways of weeding out students based on their ability to pay. It will be difficult to balance this goal without further harming diversity or creating a greater inequality gap.

Still, some effective risk-sharing effort for colleges is long overdue. When the final proposals come out, watch where the money is designated to go. Are any fines directed back toward helping students who have defaulted or are approaching default, or does the money just go back in to the general Treasury?

Unless such a fine or reimbursement scheme is tied in with a means of directly helping students, these proposals will be a step in the right direction, but will only solve one element of the problem. Let’s see what evolves up on Capitol Hill.

Check out MONEY’s 2015-16 Best Colleges rankings

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MONEY College tip of the day

Do You Have to Pay Taxes on College Scholarships?

stacks of textbooks on shelves
Rostislav Sedlacek—Getty Images/iStockphoto

Not if you and your scholarship meet these conditions.

Given the cost of college today, any assistance helps. And, fortunately, when the assistance comes in the form of a scholarship, there’s an added bonus: It’s usually not considered taxable income.

For a scholarship to be tax-free, it needs to meet a few conditions, however. Among the key ones:

  1. You must be a degree candidate at an eligible educational institution. That’s defined by the IRS as “one whose primary function is the presentation of formal instruction and that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities.” In other words, most real colleges.
  1. The money must go toward what the IRS calls “qualified education expenses,” such as tuition, mandatory fees, and required books and supplies. Room and board doesn’t qualify. Nor does travel.

If part of the scholarship involves payment for services, such as teaching or research, that portion is generally considered taxable. The scholarship provider should send you with a W-2 form around tax time each year, showing the amount that represents taxable compensation.

The IRS explains all these rules and a few exceptions in Publication 970.

For more advice on paying for college, and to create a customizable list of colleges based on criteria such as size, selectivity, and affordability, visit the new MONEY College Planner.

MONEY College

How to Use the GI Bill to Pay Your Kid’s College Tuition

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Ariel Skelley—Getty Images

Parents who don't use the benefits for their own education can transfer them to their kids.

Ingrid Bruns admits that she and her husband, Arch, probably didn’t save as much for their two daughters’ college educations as they should have. Though the couple is careful with their money (Ingrid became an Accredited Financial Counselor while living overseas as a military spouse, and now serves as director of Military Life Advice at USAA), college savings took a back seat to other savings goals, including the “forever home” they recently purchased.

“We both used personal savings and worked our way through college, so we assumed our kids would do the same,” she says. But college costs have increased dramatically since she and her husband earned their degrees, and their approach simply isn’t feasible for their daughters, one of whom is a college freshman and the other a junior.

But the Bruns family doesn’t have to scramble as much as some, because they have one ace in the hole: the Post 9/11 GI Bill. Arch’s career in the Air Force earned him benefits through this valuable program, and because he hasn’t used them himself, he was able to transfer them to his daughters.

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The Post 9/11 GI Bill benefits include up to 36 months of tuition and fees, a monthly housing allowance and a books and supplies stipend of up to $1,000 a year. For servicemembers to be eligible to use these benefits for themselves, they must have served at least 90 aggregate days on active duty after September 10, 2001, or have been honorably discharged from active duty for a service-connected disability after serving 30 consecutive days after September 10, 2001. (Thirty-six months of service on active duty is generally required to earn full benefits.)

Benefits pay full in-state tuition and fees, and recent changes to the law mean many state schools offer in-state tuition to veterans, even if they otherwise wouldn’t qualify as residents. In addition, benefits may pay up to just more than $21,000 for private schools, and The Yellow Ribbon Program provides additional support for those in college.

The requirements for transferring benefits to a dependent (spouse or child) are different, though, and require planning. Generally, a servicemember must have six years of service, apply to transfer benefits, and agree to serve an additional four years after the transfer is approved. That means parents serving in the military who have children and aren’t sure they will use the benefits themselves are wise to explore their options sooner rather than later.

Joseph Montanaro, a Certified Financial Planner with USAA, offers these tips to military families interested in using the Post 9/11 GI Bill benefits for their children’s educations:

    • Use it yourself first,” he says. “The program was designed to help vets, so take advantage.” The additional training or degree you get may help boost your earning power, which could improve your quality of life and, in turn, allow you to save more for your children’s educations.
    • Transfer early,” he recommends. Because you must commit to an additional four years of service, you want to make sure you elect the transfer as soon as you are eligible. There’s no penalty if you later decide to use the benefits for your own education.
    • Transfer to all,” he suggests. You can divvy up benefits among your spouse and/or children ahead of time, and then change the allocation later, but you can’t add a transferee after you separate from service. “I typically suggest that folks transfer a month to all their potential users (for example, one month to all kids/spouse),” Montanaro says.

With college costs rising, military tuition benefits can be a lifesaver for families trying to pay for college without debt. These benefits, while valuable, are not retroactive. So whether you come from a military family or not, if you already have student loan debt, make sure you explore all your options for student loan repayment. Often the first kind of credit many young Americans have access to, student loans can wreak havoc on your credit if they’re mishandled. This guide has some helpful info on student loan forgiveness programs that can ease or eliminate your debt load as well.

Check out MONEY’s 2015-16 Best Colleges rankings

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MONEY

7 Stars Besides Lebron Who Will Pay for Your College Education

These celebs have fame, fortune, and financial aid (for you)

Cleveland Cavaliers forward LeBron James (23) during warmups before an NBA basketball game against the Washington Wizards, Friday, Feb. 20, 2015, in Washington.
Nick Wass—AP

Last week, Lebron James won praise for expanding his charitable efforts to campus. The Lebron James Family Foundation announced plans to pay for four years of tuition at the University of Akron for more than 2,000 students.

While the basketball star’s new program will be one of the widest reaching, he’s hardly the first celebrity to push the “school is cool” mantra—and to put his money where his mouth is.

Dozens of celebrities have created scholarships at their alma maters. Several, such as Alec Baldwin’s new one at the Tisch School of the Arts at New York University or Aerosmith’s for Berklee College of Music students, are pegged to aspiring entertainers. Others, like Lebron’s, are focused on broadly increasing access for at-risk students.

Here are seven of the most generous celebrity scholarships, and what you’d have to do to have a shot at snagging one.

For advice on scholarships and other ways to pay to college, check out the MONEY College Planner.

  • Letterman Telecommunications Scholarship

    David Letterman hosts his final broadcast of the Late Show with David Letterman, Wednesday May 20, 2015 on the CBS Television Network.
    Jeffrey R. Staab—CBS/Getty Images

    One of the best-known celebrity scholarships, David Letterman’s has given money to students at his alma mater, Ball State University, every year since the mid-1980s. Grades aren’t considered, but creativity is, and telecommunications students are required to submit a project to apply. The winner receives $10,000, and there are also smaller checks for two runners-up. More information

  • i.am Scholarship

    Musician will.i.am performs at Goldie Hawn's inaugural "Love In For Kids" benefiting the Hawn Foundation's MindUp program transforming children's lives for greater success at Ron Burkle’s Green Acres Estate on November 21, 2014 in Beverly Hills, California.
    Jason Merritt—Getty Images for The Hawn Foundation

    In 2009, musician will.i.am surprised four students on the Oprah show with money to send them to college. Since then, his i.am.angel foundation has spent more than $800,000 to pay for the tuition, books, and fees of 31 students. The foundation focuses on education and college accessibility for low-income families and underserved communities, like his old neighborhood of Boyle Heights in East Los Angeles. The college scholarship is based on financial need. More information

  • Rhythm Nation Scholarship

    Janet Jackson accepts the ultimate icon: music dance visual award at the BET Awards at the Microsoft Theater on Sunday, June 28, 2015, in Los Angeles.
    Chris Pizzello—Invision/AP

    Janet Jackson’s endowed scholarship with the UNCF gives out awards of up to $5,000 to students at one of the fund’s 37 member schools, all of which are historically black colleges or universities. Recipients have to demonstrate academic achievement or active involvement in their school or community. Bonus opportunity: Janet Jackson’s late brother, Michael Jackson, has a similar scholarship in his name through the UNCF. More information

  • Kevin Spacey Foundation Scholarship

    Kevin Spacey arrives at the 4th Annual Reel Stories, Real Lives Benefit held at Milk Studios on Saturday, April 25, 2015, in Los Angeles.
    Richard Shotwell—Invision/AP

    The acclaimed actor says that people who’ve been successful in their fields have an obligation to “send the elevator back down” to help others reach the same heights. That’s why his awards are tied specifically to performing arts and film programs at two universities: Regent’s University London and Pace University in New York. Eligibility depends on the university and academic program, but in general, there are 13 scholarships available at Regent’s School of Drama, Film & Media that are worth £30,000 each over three years, and seven one-year scholarships at Pace covering $10,000 of tuition. More information

  • Turn 2 Foundation Scholarship

    Former New York Yankees shortstop Derek Jeter (2) before the game against the Boston Red Sox at Fenway Park on Sep 28, 2014.
    Greg M. Cooper—USA Today Sports/Reuters

    Derek Jeter’s foundation, which encourages young people to “turn 2” healthy choices instead of drugs and alcohol, includes at least five college fund programs. For one, the beloved Yankees star teams up with the foundation of another baseball great for the Jackie Robinson/Derek Jeter Scholarship, which provides money and mentors for minority students. Another one, the United Negro College Fund/Sharlee Jeter Scholarship gives $30,000 over four years to students attending historically black colleges or universities. Other Jeter scholarships are defined by geography for students in areas of New York, Michigan, and Florida, and primarily given based on leadership, academic excellence, and participation in extra-curricular activities and community service. More information

  • Shawn Carter Scholarship

    Jay-Z at the 2015 VANITY FAIR Oscar Party held at Wallis Annenberg Center for the Performing Arts, Beverly Hills, CA, on February 22, 2015.
    Nicholas Hunt—McMullan/Sipa USA/Getty Images

    Taking its name from the real one of hip-hop mogul Jay-Z, the Shawn Carter Scholarship Fund gives a number of one-year scholarships. The amounts vary but are generally worth between $1,500 and $2,500. Students must have a minimum GPA of 2.0 and can attend any accredited two-year, four-year, or trade school. The foundation, co-founded by Jay-Z and his mom, says it considers many factors when choosing winners, including leadership, community service, and financial need. More information

  • Kirk Douglas Scholarship

    Actor Kirk Douglas arrives at the 2013 Vanity Fair Oscars Viewing and After Party on Sunday, Feb. 24 2013 at the Sunset Plaza Hotel in West Hollywood, California.
    Jordan Strauss—Invision/AP

    Today’s college students may not all know who film legend Kirk Douglas is—his most famous titles are now more than half a century old—but students at St. Lawrence University can still benefit from his generosity. Douglas and his wife, Anne, have donated $7.5 million to his alma mater for a scholarship they started in 1999. The award, meant to promote diversity on campus, is for students from underrepresented and low-income backgrounds who excel in academics and leadership. It’s a comprehensive scholarship, meaning it covers all tuition, fees, and room and board for four years. More information

MONEY Student Loans

Yay! Now Only 1 In 5 Student Loan Borrowers Are Behind

Improving economy, more flexible repayment plans reduce delinquencies.

The percentage of federal student loan debtors who are behind on their payments, while still shockingly high, is declining, the U.S. Department of Education reported today.

The proportion of borrowers who are more than 31 days late in their repayments fell by more than 2 percentage points, to about 21%, in the last year.

Financial aid experts said that while heartening, that still means that more than 1 out of 5 people whose federal student loan payments are due—because they either graduated or dropped out more than six months ago—are behind on their bills. (The government issues automatic payment deferrals to borrowers who are enrolled in school at least half-time, so current students are not considered delinquent.)

“Declining delinquencies are a good thing,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators. “Whatever the reason for the drop, more borrowers are steering away from the terrible consequences of defaulting,” which are triggered when a borrower falls nine months behind in payments and can result in big fines and long-lasting credit problems, he said.

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Draeger and other experts pointed to four main reasons delinquencies have fallen:

  • The improving economy has created jobs that are allowing more debtors to earn money to pay back their loans.
  • Families have paid down many other debts and thus can better afford their student loan bills.
  • More colleges are reaching out to graduates to help them apply for the best repayment options, in part because of toughened government penalties against colleges whose alumni have high default rates.
  • More debtors are taking advantage of the government’s “income-driven” repayment plans. The Education Department said that almost 4 million debtors have now signed up for one of the flexible repayment options, an increase of 56% in the last year.

The federal government now offers a dizzying array of income-driven repayment options, but the standard plan adjusts debtors’ payments to 10% of their disposable income. Disposable income is defined as any amount above 150% of the federal poverty line, or $17,655 for a single person. So anyone earning less than that would have their payments waived entirely until they earned more than the cutoff.

The flexible payment plans, while attractive in theory, have been criticized by borrowers and some federal investigators. The Consumer Financial Protection Bureau announced this week that it was looking into borrowers’ complaints about slow processing of applications.

In addition, some naïve borrowers have been shocked to learn that when their payments are waived or are reduced below the cost of the interest, the total size of their loan keeps rising. It is standard practice for lenders of all types to add unpaid interest to a debt. A recent study by the Federal Reserve Board of New York found that about one-third of all student loan borrowers are making payments on time, but the payments are so small that the size of their debt is growing.

The government’s new income-driven repayment plans do offer some hope for such borrowers, however, since those who keep making their payments for at least 20 years (or just 10 years if they work in a public service job) will have any remaining balance forgiven.

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MONEY

A New Way to Define ‘Affordable’ College

mortarboard with price tag
Sarina Finkelstein (photo illustration)—Shutterstock (2)

Everyone talks about affordability, but what exactly do they mean?

During a higher education hearing on Capitol Hill last month, Lumina Foundation CEO Jamie Meritosis made a telling observation: While nearly everyone agrees that higher education has become unaffordable for many families, few can define what “affordable” actually means.

“It’s an eye of the beholder issue for us right now,” he added later.

Today the foundation, which focuses on higher-ed issues, is out with a suggested formula for determining what’s affordable. It would be the amount families could set aside by saving 10% of their discretionary income for 10 years, plus what students could contribute from working 10 hours a week while in school, or $14,500 over four years at current minimum wage.

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Most conversations about affordability focus on college prices, then available grant aid, and finally, what students are left to pay, the Lumina paper says. Instead, this “Rule of 10” proposal aims to reverse that by first defining the maximum amount students can reasonably be expected to pay, and then encouraging colleges and policymakers to use that as a guide in setting prices or designing aid programs.

The proposal is set up as a sliding scale, so that families who earn more would be expected to pay more. And in recognition that some families can’t afford to save 10%—or anything, for that matter—those with an income below 200 percent of the poverty rate would be exempt from the savings part of the contribution. (That would be a household income of $48,500 for a family of four, under current poverty rate guidelines.) Following the formula, a family making an average of $100,000 annually would be expected to save $429 a month for 10 years, or $51,500 in total for college costs.

The Rule of 10 was designed to be easily understandable, Lumina says, unlike the complicated formula the federal government currently uses to determine expected family contribution.

But that also means it may be unrealistically simple. There’s little mention of how much families would contribute from current income while a student was in school or what an acceptable amount of loans would be, aside from a suggestion that those families who don’t meet the savings guideline could be expected to make up the difference through current earnings, additional work, or loans. Another option, according to the paper, would be using the same formula to set the maximum amount of loans a student should be expected to borrow.

“The idea behind this framework isn’t to create a one-size-fits all approach, but rather to provide guidelines that can be easily understood and tailored to individual students,” said Zakiya Smith, strategy director at the foundation, in a press release.

To demonstrate that, Lumina compares college costs to housing costs. The general guideline is that housing shouldn’t eat up more than 30% of income. But while that’s a goal, it’s certainly not applicable for every household. The same will be true of college savings, the paper says.

And like housing affordability, agreeing on a definition of affordable is helpful, but it isn’t the same as finding a solution for how to pay for all the costs that go beyond what’s affordable.

MONEY College tip of the day

1 Really Bad Way to Pay for College

hand with envelope of money
Getty Images—iStockphoto

Why you should keep your paws off your IRA.

You may have read that you can take cash from your IRA to pay for college tuition, without incurring the usual 10% penalty on withdrawals made before age 59 1/2. The IRS calls it the “education exception to additional tax on early IRA distributions.”

But just because you can doesn’t mean you should. In fact it’s a pretty dreadful idea.

Among the reasons:

1. You’ll have less money saved for retirement. And not just the amount you withdraw but whatever it might earn, tax-deferred, between now and the time you retire.

2. You’ll still have to pay taxes on the withdrawal. As a result, you’ll net considerably less than you withdraw. Julian Block, an attorney and tax expert in Larchmont, N.Y., gives this simplified example: Let’s say you want to take $10,000 from your IRA. Even if you’re in the relatively low 15% federal income tax bracket, you’ll owe $1,500 in taxes, netting you just $8,500. If your state has an income tax, that will reduce your net further. What’s more, the amount you withdraw will increase your adjusted gross income for the year, which could affect your eligibility for certain tax deductions and even push some of your income into a higher tax bracket.

Note that this applies to early withdrawals from Roth IRAs as well as the traditional kind, although you can withdraw your contributions to a Roth, but not their earnings, at any time without taxes or penalties. The IRS has more details on its website.

Block suggests that if you own a home, taking out a home equity loan might be a better idea. Not only will you sidestep the problems associated with IRA withdrawals, but some or all of the interest you pay should be tax deductible.

“I would look on an IRA withdrawal as an option of last resort,” Block says.

“Before you go ahead with one,” he adds, “first see what rate is available from Tony Soprano.”

For more advice on paying for college, and to create a customizable list of colleges based on criteria such as size, selectivity, and affordability, visit the new MONEY College Planner.

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