Tuition Inflation Makes Student Loans a Necessity
July 11th, 2012 by Jennifer Frankel

Benjamin Franklin may have once said that “the only things certain in life are death and taxes” but at the dawn of the 21st century that infamous duo has admitted a new member: inflation. Although less well-known, inflation – the tendency of prices in for goods and services in general to rise over time – is no less sobering. Moreover, because inflation affects different goods and services at different rates, the inflated cost of higher education in the US – otherwise known as tuition inflation – means that inflation will affect the average student long before either death or taxes come knocking.

According to the New York Times, even at the height of the Great Recession in 2009 – when the Consumer Price Index, a widely used measure of inflation, fell by 2.1% in the US – the cost of public colleges and universities rose by 6.5%. Not that this is the only time general inflation and tuition inflation have dramatically diverged. Over the last 20 years, general inflation averaged 2.8% per year. Using 1990 as a peg, this means that the average cost of a year of college should have been a mere $7,889 in 2010. As doubtless any student can tell you, however, the real rate is quite different. Indeed, the $15,213 price tag students faced in 2010 amounts to a 6.2% increase each year for the last 20 years.

While it is clear that such tuition inflation has made student loans a necessity, it has not made them an easier burden to bear. While the costs of higher education have risen, the wages that degree-holder garner have not. The median salary for someone with a Bachelor’s degree in 2010 was actually the same as it was in 2000. Still, even if the risk/reward ratio for college graduates has shifted, it is considerably worse for those without advanced degrees. Over the same period, their earnings actual fell. Thus, college itself remains as much a necessity as the student loan financing it may require.

One Comment

  1. dinesh says:

    A feel to be proud after read your article.This very useful article for students. The information in this article quality information. i like it.

Join the conversation




Get the Financial Aid Newsletter!