Is College Getting More Expensive? College Costs Compared to Inflation

Introduction: The Rising Cost of College

Will you continue with your college journey or not? This is a valid question, considering the rising college costs. Indeed, many families consider costs as the primary factor in their decision-making. College costs compared to inflation may have students questioning their futures.

On average, tuition and related fees at public four-year universities have increased by 179.2% in the last 20 years. This translates to a 9% average annual increase (1969-2020). After inflation adjustments, college tuition has increased by 747.8% since 1963. Think about it: You’ll be paying almost twice what your parents paid for in college. 

When compared to inflation, college tuition inflation has increased faster, too. The economic inflation-tuition inflation comparison is crucial for many reasons.

First, it provides economic context. We can determine whether the rising college costs are part of a larger economic trend or not. If the college inflation rate is higher, it can be a sign of trouble.

Second, it indicates less affordability and accessibility of a college education. When the increase in college costs outpace living costs, college becomes less important. Even with financial aid, college students can still struggle to pay for their necessities.

Third, it can contribute to increased student loan debt. With a year-to-year increase in the cost of college, taking out student loans is a sensible idea – at first.

Fourth, it has negative effects on economic mobility and progress. Earning a college degree is still considered a pathway toward the American Dream. If more individuals cannot afford a college education, it affects workforce quality, too.

Indeed, we must be aware of the impact of inflation on the cost of college. We can then determine whether a college education is still worth it or not. Keep in mind that the rewards of a college education should outweigh its costs.

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• How Much is Too Much to Pay for College?
• Rising Costs: Cost of College Degree Over Time
• The Real Cost of College Out of State: Breaking It All Down

What Is Inflation?

Inflation is the rate of increase in prices (i.e., expressed as a percentage) over a specific period. The term refers to either a broad measure (e.g., cost of living) or specific goods (e.g., food products). Inflation affects every product and service, from basic needs to luxury items, too. The inflation rate is usually measured on a year-to-year basis for comparison purposes.

The Bureau of Labor Statistics measures inflation rates and publishes its key indicators. The Consumer Price Index—the most commonly used measure of inflation—is determined using this basic process:

• The BLS and other government agencies conduct household surveys to determine a “basket” of commonly purchased goods and services. These include food and beverages, housing expenses, transportation costs, and education costs, among others.
• The CPI refers to the cost of a basket at a specific period compared to the cost of a basket in a base year.
• The percentage change in the CPI over a specific period, usually a year, is the inflation rate. 

Let’s suppose $200 is the cost of the basket in a base year, and the current year’s basket is $220. The CPI is 110, while the inflation rate is 4.76%.

With that said, inflation represents a gradual decrease in the consumers’ purchasing power. Your actual basket of groceries, for example, will be smaller in number if you spend the same amount.

Cost-saving measures become more common in your household, particularly with a fixed income. You’re less able to buy “wants” to focus on being able to meet “needs.” Switching to cheaper alternatives, buying in bulk, and using coupons also become more common.

Inflation also results in less value for your savings and investments. Your savings, for example, will be less valuable in the future because you can buy fewer items. Even your investments, such as bonds and stocks, will earn less in real terms. For example, if your investments earned 5% but the inflation rate was 2.5%, you only earned 2.5% in real income.

There’s also the effect on the cost of borrowing. Lenders increase their interest rates on loans to compensate for the decrease in purchasing power. Loans become more expensive, which, in turn, affects consumer spending and habits.

The bottom line: Inflation affects everything in the economy including your household spending habits. Furthermore, inflation affects college tuition inflation, too. After all, colleges and universities offer educational services – and these cost money.

How Has the Cost of College Changed Over Time?

The National Center for Education Statistics has kept tabs on college costs since the early 1960s. The increase is often compared to inflation rates. In many of these years, college tuition inflation has outpaced inflation. Here’s a summary of the rising college costs over the decades.

Note that the figures are in current dollars, based on the NCES table. The term “current dollars” means the nominal value of the dollar in the year it is reported. No adjustments for changes in the value of the dollar, such as inflation or deflation, were made.

Academic Years (From-To)	Average Tuition and Fees	Percentage Increase in Average Tuition and Fees (10-year period, unless otherwise stated)	Approximate Inflation Rate per Year
1963-1970	$508 – $645	26.97% (7-year period only)	3.9%
1970-1971 and 1979-1980	$688 and $1,163	69.04%	7.0%
1980-1981 and 1989-1990	$1,289 and $2,839	120.25%	5.5%
1990-1991 and 1999-2000	$3,016 and $5,222	73.14%	2.9%
2000-2001 and 2009-2010	$5,377 and $9,135	69.89%	2.5%
2010-2011 and 2019-2020	$9,575 and $13,360	39.53%	1.7%
2021-2022 and 2022-2023	$13,674 and $14,688	7.41% (3-year period only)	2.6%

The bottom line: College is, indeed, getting more expensive. Such is its rising costs that, in many years, tuition inflation increased faster than general inflation.

Why is College Becoming More Expensive?

Aside from the direct relationship between general inflation and education costs, here are the other reasons for the increase in college costs.

Decrease in government funding for colleges and universities

The federal and state governments have slashed funding for postsecondary institutions, particularly after the 2008 Great Recession. Colleges and universities impose a rise in tuition and fees to offset the decrease in funding. Students, in turn, borrow more to pay higher college costs.

Increase in administrative expenses

Colleges and universities pay competitive salaries to recruit and retain the best faculty and staff. Universities also have more staff members for various offices, such as financial aid, diversity, equity and inclusion, and regulatory compliance offices.

Technology integration and campus maintenance

Colleges and universities must keep up with the times, technology-wise. Building and maintaining a state-of-the-art technology infrastructure, including facilities, software licensing, and IT support, all demand serious money. This is also true for building, maintaining, and upgrading on-campus facilities, such as dormitories, classrooms, and libraries.

Increased investment in student support and career development services

Mental health services, financial wellness coaching, writing and math centers, and career counseling cost money, too. These are intended for the enjoyment of students, particularly for their academic success and college experience. But students bear the brunt of their costs, too.

Continuing demand for college degrees

More employers adopt the skills-based hiring approach, meaning there’s more focus on skills and talents. But, many employers still look for college degrees among applicants. At least two-thirds of jobs still require a college education. This means colleges and universities have the upper hand and, thus, charge more.

Indeed, college affordability is among the most urgent and pressing issues facing our nation today.

The Impact of Rising College Costs on Students and Families

The challenges that come from paying for college have a negative impact on students and their families. First, the immediate financial pressure means redirecting money from necessities to education. Many students will skip meals, find part-time work, and even drop courses to be able to pay for college. Their academic performance and progress suffer in the process.

The financial stress contributes to increased anxiety, stress, and even depression for students and their families. Their family dynamics and relationships are affected, too.

College students take out federal and private loans to pay for their college expenses. But while it’s a short-term solution, the long-term effects are serious. Many graduates struggle with repayments and default on their loans. Delays in achieving life milestones, such as buying a house, are common, and credit card scores take a plunge.

Conclusion: Is College Worth the Cost?

In conclusion, college costs are on the rise, often increasing faster than the general inflation. Students and their families experience their negative effects, from financial stress to relationship breakdowns. Colleges and universities increase their tuition and fees because of general inflation, as well as spikes in their administrative costs, among others.

But we still believe that a college degree is worth its cost. You will enjoy more career advancement opportunities, better quality of life, and greater happiness.

Of course, we understand that the rising costs of college are a significant concern. Fortunately, there are effective ways of paying for college:

1. Apply to as many financial aid programs as possible, starting with filing your FAFSA.
2. Consider work-study programs.
3. Start your college journey in a community college or an online program.
4. Engage in financial planning.