College tuition inflation since 1980 has been rising. In fact, widely cited statistics have consistently shown college tuition rising faster than inflation.
It’s no secret: College tuition is on the rise, and it has been for years. According to the most recent data from the National Center for Education Statistics, during the 2018-2019 academic year, tuition, fees, room, and board costs at undergraduate institutions were:
• $18,383 at public institutions
• $47,419 at private nonprofit institutions
• $27,040 at private for-profit institutions
Between 2008-2009 and 2018-2019, costs rose 28% at public institutions and 19% at private nonprofit institutions. However, the costs for private for-profit institutions have reduced 6% in 2018-2019 compared to 2008-2009.
In comparison, public institutions cost $8,312 in 1985-1986 and private nonprofit and for-profit institutions cost $20,678 in the same year, according to NCES , a subagency of the U.S. Department of Education.
More recent statistics from the College Board’s 2021 Trends in College Pricing and Student Aid reflected just tuition and fee costs (not including room and board) in 2021-2022:
• $10,740 for public four-year in-state institutions ($170 higher than last year, which represents a 1.6% increase before adjusting for inflation)
• $27,560 for public four-year out-of-state institutions ($410 higher than last year, which represents a 1.5% increase before adjusting for inflation)
• $3,800 for public two-year in-district institutions ($50 higher than last year, which represents a 1.3% increase before adjusting for inflation)
• $38,070 for private, nonprofit four-year institutions ($800 higher than last year, which represents a 2.1% increase before adjusting for inflation)
Why has college tuition outpaced inflation, anyway? We’ll walk you through a complete guide to understanding college tuition vs inflation and the reasons college tuition has outpaced inflation over time. Let’s learn more.
What Is the College Tuition Inflation Rate?
First of all, inflation refers to a decrease in how much individuals can purchase with their money, based on increases in the prices of goods and services. According to Macrotrends, the general U.S. inflation rate for 2020 was 1.23% . Inflation peaked at 13.55% in 1980, at its highest levels since 1960.
Each college has its own tuition rate increase per year, so to get an accurate measure of an individual college’s tuition inflation rate, you can use the Bureau of Labor Statistics (BLS) inflation rate calculator to calculate the current inflation of college tuition rate for each institution based on previous tuition costs.
Data from the annual Commonfund Higher Education Price Index® (HEPI) shows that inflation for U.S. colleges and universities rose 1.9% in 2020, a decline from last year’s 3.01% rate and the lowest reading since 2016’s 1.5%.
Ultimately, the average cost of tuition has increased more than 144% since 2001 on average, even after accounting for inflation.
How Does Inflation Affect College Tuition?
When the cost of goods goes up, colleges and universities offset the increased cost of operating by increasing tuition.
The Higher Education Price Index (HEPI), which measures the price changes of items that allow universities to stay afloat, doesn’t align exactly with the Consumer Price Index, which refers to what consumers pay for goods.
It’s can be difficult to make an apples-to-apples comparison between rising tuition at colleges and universities and changes in inflation because the HEPI is affected by more than just the cost of goods. For example, administrators, professors, financial aid professionals, admission counselors, and others also require salary increases on top of the miscellaneous expenses associated with keeping college and university facilities running.
Recommended: What is the Average Cost of College Tuition?
Why Is the Cost of College Rising?
There are other reasons that cause tuition, room, board, and fees to increase from year to year. In the next section, let’s explore the reasons that it becomes more expensive to run a school. We’ll discuss state funding availability, demand, and financial aid.
Less State Funding
Declining state funding has influenced tuition costs at state universities as health care and pensions increase for state employees.
As a direct result of the last two economic recessions, education appropriations remain 6% and 14.6% below 2008 and 2001 levels, respectively, according to the 2020 State Higher Education Finance (SHEF) report produced by the State Higher Education Executive Officers Association (SHEEO).
Vermont allocated the smallest amount per full-time student at $3,387 and Wyoming appropriated $21,802 per full-time student in 2020, according to the report.
However, state funding for financial aid has increased steadily for two decades. State and local funding reached $100 billion for higher education for the first time in fiscal 2019.
As demand rises, costs increase as well. More than five million more students attended U.S. colleges in 2017 than in 2000, though between fall 2009 and fall 2019, total undergraduate enrollment decreased by 5% (from 17.5 million to 16.6 million students), according to the most recent data from NCES .
Despite recent statistics, it’s still evident that the demand for higher education has continued to increase over the past few decades. The dependence on a highly skilled workforce and growing wage differences between college and high school graduates means more students choose to attend college and drive up the demand for higher education. Higher education prices must increase in response to a growing student population.
More Federal Aid
The 1987 Bennett hypothesis (named after President Ronald Reagan’s secretary of education, William Bennett), stated that colleges will raise tuition when financial aid increases, especially subsidized federal loans that offer low interest rates. In other words, the theory was that colleges can raise prices because federal financial aid will cover the excess costs and students can offset the cost increase with federal student loans.
Is the Bennett hypothesis still a worry today?
The New York Federal Reserve compiled a 2015 study that supports that finding. It found that student credit expansion of the past fifteen years has risen with college and university tuition.
Why Has College Tuition Outpaced Inflation?
It’s not easy to pinpoint one single reason for the rise in college tuition — you might be quick to blame governments that face deep deficits and cannot subsidize the full costs of higher education. However, the truth is that the costs of outpaced inflation are multifaceted.
Colleges often attempt to raise tuition to appear competitive with similar institutions, increasing costs across the board. University presidents also face enrollment demands and increases in HEPI also inflate budgets. That’s why high school students, together with their families, may want to carefully plan for the costs of attending a particular institution. Some options for students who are looking into financing their education might include finding work during the summer, applying for financial aid, or looking into payment tuition plans.
College Tuition Inflation Since 1985
According to data from the NCES, since 1985 the average college tuition at all institutions has increased nearly $20,000 from $4,885 to $24,623 during the 2018-2019 school year. That number is even higher when considering the cost of attending a four-year institution, which in 1985 was $5,504 and during the 2018-2019 school year increased to $28,123
College Tuition vs Inflation
The increase in college tuition and fees have outpaced the rise of inflation for decades. According to Forbes , the cost of attending a four-year college or university during the 2021-2022 school year was increasing at double the rate of inflation. The cost of attending a two-year community college is increasing a third faster than the rate of inflation.
However, in light of the COVID-19 pandemic, this has changed slightly. From the 2020-2021 school year and the 2021-2022 school year, tuition and fees increased by about 0.6% on average, while overall princess in the U.S. increased by 3.2%, according to Bloomberg based on data from the BLS.
College tuition has increased dramatically — increasing by nearly 144% in the past 20 years. The reasons for such an rise in tuition can be attributed to a variety of factors including less state funding, an increase in demand, and even an increase in the amount of federal aid awarded.
Despite the seeming downsides to inflation and college costs, SoFi can offer some major perks to help you pay for school with our private student loans. Note because private student loans don’t offer the same benefits as federal student loans (like income-driven repayment options) private student loans are generally considered only after students have carefully reviewed all other sources of funding and financial aid.
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