A Benchmark for Making College Affordable – The Rule of 10

collegeAs part of its ongoing contributions to improving higher education, the Lumina Foundation issued a white paper in August 2015, A Benchmark for Making College Affordable – The Rule of 10. The paper initially references the 45 percent increase in the cost of college over the past decade while the average family income rose only 7 percent over the same period. Along with increases in the amount of debt held by the average undergraduate after completing college, the affordability situation is getting bleaker, particularly for lower-income students.

In order to reach ‘Goal 2025’ (Lumina’s goal that 60 percent of all Americans hold either a college degree, completed certificate or some other post-secondary credential by 2025), the authors posit that colleges will need to increase their African-American population by 700,000 students and Hispanic students by 3,000,000 to meet the 60 percent target. Blacks and Hispanic students and families have less than one 10th of the accumulated wealth of white students, making achievement of this goal without borrowing money much more difficult.

Lumina targeted a few objectives for proposed student financing models. The design principles underpinning the construction of these models are:

  • make college more affordable,
  • focus on transparency of prices and subsidies,
  • embed incentives for students and institutions, and
  • align across federal, state and institutional systems.

Additionally, the authors state that most colleges set tuition based on how much money they need, rather than what students can afford. Lumina suggests that policymakers consider what students can afford and build a model around that and not what colleges choose to charge. The authors write that the Expected Family Contribution calculation (part of the Federal Student Aid program for a long time) is confusing and should be discarded going forward.

The new standard for determining how much a student should pay — “The Rule of 10” — requires that families save 10 percent of discretionary income for 10 years, and that each college student in the family work 10 hours per week (or 500 hours per year) while enrolled. The Rule of 10 benchmark includes:

  • a reasonable time period for saving for college – 10 years,
  • an income exclusion (families with incomes below 200 percent of the poverty rate would be excluded from the required savings),
  • the idea that students should contribute through work, but not too much work to interfere with studies, and
  • an easily understandable benchmark that would scale with rising family incomes.

Discretionary income is defined as the difference between the family’s overall income and 200 percent of the poverty rate (current Federal Student Aid standards use 150 percent of the poverty rate). By subtracting that basic income level as a threshold minimum, the authors believe that college should be free (other than proposing that students work 10 hours a week during college) for families below 200 percent of the poverty level.

Lumina acknowledges that many issues would need to be resolved with such a proposal. There’s nothing magic about either 10 percent or 10 years; Lumina thinks those are reasonable benchmarks for policymakers to consider in any affordability proposal, with supporting data. In fact, looking at the Bureau of Labor Statistics Consumer Expenditure Survey cited by Lumina begs the question of how families’ need for greater retirement savings would conflict with this 10 percent threshold (another topic for an economist to review). The pie chart on Page 7 of the report indicates that personal insurance and pensions currently comprise 11 percent of family expenditures.

Lumina proposes a few additional issues for consideration, including:

  • how best to assess quality within the context of affordability,
  • examining whether current constructs of dependency status still make  sense,
  • how best to calculate the appropriate amounts and time horizon for someone whose life circumstances change significantly during the benchmark time frame,
  • how to improve and increase need-based aid to help meet the benchmark, and
  • how to determine appropriate state subsidies for public institutions while controlling costs to manage tuition to make the benchmark more realistic.

Lumina asked for feedback on these and other standards and looks forward to working with a diverse group of thinkers to further construct the affordability benchmark.

I commend Lumina for addressing college affordability and what students and their families should reasonably expect. All of the issues raised are considerably complex, i.e., how to factor income from a divorced parent and the appropriate 10-year time period to track for savings. I also commend their premise of defining affordability from the student’s perspective. There are presumably economists with datasets of family size and income that would allow the modeling of what the ultimate cost to families would be if the Lumina Goal 2025 were to be achieved (the 60 percent attendance target for degree- or certificate-seeking post-secondary students). Ultimately, the discussion will come down to a debate about costs to families and taxpayers and whether the higher education community can design a lower-cost product with comparable perceived quality as existing higher education options.

Subjects of Interest


Higher Education

Independent Schools


Student Persistence