College tuition benchmark posts big drop in August

Dive Brief:

  • The Consumer Price Index (CPI) for college tuition and fees saw a significant decline from July to August, according to U.S. Department of Labor statistics data released Friday. 
  • The CPI for the category slid by a seasonally adjusted 0.7%, the biggest drop since 1978, according to Bloomberg. Year-over-year, the index for tuition was up only 1.3%, according to the department’s unadjusted figures. 
  • The decrease comes as colleges reduce tuition to stay competitive during the pandemic, but experts fear they will struggle to increase their rates later. 

Dive Insight:

The public health crisis laid waste to many colleges’ budgets, as most refunded housing costs in the spring while anticipating enrollment declines and, for public institutions, a downturn in state support in the fall.

Some colleges, concerned students may not want to pay for a virtual term or wanting to help them during a financially shaky time, reduced tuition. Institutions were also under threat of lawsuits to pay back tuition because classes moved online in the spring.

Notably, Williams College, the wealthiest liberal arts school in the U.S., cut its cost of attendance by 15%. Other high-profile universities followed with similar cuts, including Princeton and Georgetown.

But many schools kept their rates the same. Colleges had motivation to offer face-to-face classes as a way to capture more tuition revenue, Robert Kelchen, a higher education professor at Seton Hall University, wrote in an email. He noted that decreases in tuition revenue are “very unusual.”

However, he added, “students know their buying power right now regardless of how classes are being offered and are asking for more in financial aid even if tuition is steady.”

Tuition prices have steadily risen for decades. The CPI for the category grew by more than 160% over the last 20 years while the general CPI rose just 50%, Bloomberg reported. 

Colleges experienced major cost increases during that time, according to the Higher Education Price Index, a prominent measure of higher ed inflation. The most recent report showed the inflation rate for colleges was 2.5% during the 2019 fiscal year. That marked a decline from increases of 2.9% and 3.4% for fiscal years 2018 and 2017, respectively. 

Whether colleges will be able to increase tuition next year remains uncertain, Kelchen wrote. Even before the pandemic there were calls to make tuition more affordable, which saw colleges discounting tuition and increasing financial aid to attract students. 

And some colleges that cut tuition this year may struggle to return to their pre-pandemic rates, as students and families come to expect a certain price point.

“It’s sort of similar to creating a federal policy that gives money,” Dominique Baker, an education policy professor at Southern Methodist University, told Education Dive in July. “Once people are used to their subsidy, it’s incredibly challenging to pull that away.”

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