A good rule of thumb is that tuition rates will increase at about twice the general inflation rate. During any 17-year period from 1958 to 2001, the average annual tuition inflation rate was between 6% and 9%, ranging from 1.2 times general inflation to 2.1 times general inflation. On average, tuition tends to increase about 8% per year. An 8% college inflation rate means that the cost of college doubles every nine years. For a baby born today, this means that college costs will be more than three times current rates when the child matriculates in college. This section of FinAid provides detailed information about the rate of increase of college tuition.
The following table and chart shows the geometric mean of college costs and general inflation for the period from 1958 through 1996, as well as the ten-year periods ending in 1986 and 1996. As can be seen from the table, the college inflation rate runs between one and a half to two times the general inflation rate.
The following table shows the college cost inflation rate and the general inflation rate for the years from 1958 through 1996. College cost inflation rates are based on the Digest of Education Statistics for the years 1958-1970 and the College Board figures for four-year private colleges for the years from 1971 to the present. General inflation figures are based on the annual Consumer Price Index for All Urban Consumers figures from the Bureau of Labor Statistics.
Statistically, there is no correlation between college inflation rates and general inflation rates. After all, increases in college tuition rates represent a very small percentage of the CPI. Even the rule of thumb that college costs increase at twice the inflation rate is not valid. As can be seen from the table, the college cost inflation rate has run from a high of 6.5 times the general inflation rate to a low of half the general inflation rate, with an recent average of about twice the general inflation rate. In recent years the college cost inflation rate has been decreasing to 5% as colleges try to control escalating costs. (This trend may be ending because of the souring economy.)
Please note that the College Board annually recomputes the base year cost averages when it calculates the current year averages. The new base year cost averages can (and often do) differ from the averages reported during the previous year. As such, the College Board figures are not based on an index like the general inflation rates. This can lead to gaps of as much as 1% between successive years, meaning that the College Board figures may be underreporting the actual rate of tuition increases. The College Board reevaluated its methodology for the 2002-2003 academic year, but did not make any fundamental changes other than improving the explanations of their methodology.
Since the Consumer Price Index includes a "College tuition and fees" component, it is possible to use that component as an index of historical tuition inflation. It reflects consumer spending on college tuition during the calendar year and is based on the same methodology as the Consumer Price Index. The second table provides these figures. Note that these figures show an average tuition inflation rate from 1979 to 2001 of 8.0% and from 1997 to 2001 of 4.5%. An inflation rate of 8% means that a baby born today will face college costs that are 3.7 times current costs.
The average magnitude of the difference between the BLS figures and the College Board figures is 1%, and the cumulative difference from 1979 to 2001 is about a quarter of a percentage point per year. The cumulative difference from 1991 to 2001 is three quarters of a percentage point per year. The BLS figures are, on average, higher than the corresponding College Board figures.
Based on these figures, it would be reasonable to expect an average college inflation rate of 7% or 8% per year for the next ten years.
College Board Figures
Bureau of Labor Statistics Figures
Higher Education Price Index
The Higher Education Price Index (HEPI) is similar in concept to the Consumer Price Index (CPI), but measures inflation based on a basket of goods and services used by colleges and universities. It is calculated for each academic year (July 1 to June 30) by the Commonfund Institute. The CPI figures in the following table are June to June ratios.
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