With Allentown, any time you buy a property for $15-20k, it's pretty easy to spend the same amount in rehab... so that $2,000 / month easily drops to a much more realistic level then!

What are the Reno budget should range from 3-40k? 

If you're looking for a quality contractor, you must be willing to pay more and budget more.

I also advised them that we aren't willing to go month to month because my wife and I are planning a trip out of the country for two months and we can't allow the house to sit vacant without renters during this time (and then have to return and spend another month looking for and qualifying new tenants).

Remember that students are typically tougher on a property than other tenant groups and you need to factor that into your capex/maintenance budget. 

Spend the next stage of your life living conservatively and saving every dime for investing and for a reserve fund.

Since we don't need the cash flow to live on, we're taking it slow as we figure out whether the money we cleared is real cash flow or if we'll end up at breakeven after spending on capex.

I had the budget looked over by another contractor and he believes it was grossly underbid from the start.

What is the rehab budget based upon? 

Can you usually tell them a budget you're sticking to and have they been able to stick to it?