Measuring Tuition Inflation

What’s the best way to measure tuition inflation?

It isn’t as straightforward as it sounds.

The question was prompted by a tweet from Carlo Salerno responding to one by Senator Elizabeth Warren. Warren noted that tuition at her public university was $50 per semester when she attended, and that it’s far higher now. Salerno noted that she didn’t account for inflation, which is true.

So I checked the Bureau of Labor Statistics inflation calculator website. It indicated that $50 in 1970 would be slightly over $400 now. At that level, Warren’s point stands; $400 per semester is far lower than just about anybody charges. Salerno responded that the relevant number occurs after grant aid is factored in, and Pell Grants hadn’t started yet back then.

Of course, once you start with the asterisks, they keep coming. And which asterisks you decide to include will follow from which questions you consider relevant and why.

I don’t belong to the camp that says if Pell covers it, then it doesn’t count. That’s because most students don’t receive Pell Grants at all, and among those who do, many don’t receive the full grant. If you fall into the no-man’s-land between the Pell threshold and an income level at which tuition doesn’t matter, then the fact that post-Pell costs are lower doesn’t mean much. And that’s where most people are.

(As Sara Goldrick-Rab likes to point out, too, the relevant number from the student’s perspective is the total cost of attendance. In many parts of the country, rents have gone up much more quickly than inflation or wages; if you happen to live in one of those places and attend a community college, tuition may be less than half of the total cost of attendance.)

Means-testing for benefits is a much larger issue, but for present purposes, I’ll note that plenty of parents who make too much for Pell are still struggling with college costs.

For the sake of specificity, I decided to look at Rutgers, the flagship public university in my state. Assuming an in-state undergraduate attending the least expensive program at the New Brunswick campus, the most recent tuition and fee total I could find on the Rutgers website was $9,166.70 per semester. Assuming full Pell—which, again, doesn’t apply for most students—the post-Pell cost would be $5,469.20, or about 13 times Warren’s cost after inflation.

Again, asterisks apply. New Jersey has a Tuition Aid Grant program that can defray some costs for some students. It also has the Garden State Guarantee, which allows students who did the first two years at community college to get the next two years tuition-free if they meet certain GPA requirements. And there’s the general phenomenon of airline pricing, by which some universities use scholarships as discounts to attract the students they want. Outside of those paying full freight, it’s entirely possible that no two students in a decent-size classroom are paying the same amount to be there. That makes blanket estimates difficult.

Still, broad patterns are clear. If you aren’t receiving significant grant aid, and you’re in an area in which housing costs have outpaced inflation, you’re paying far more than previous generations did. Tuition broadly has increased much more quickly than general inflation for a host of reasons, ranging from public disinvestment to the need for IT infrastructure to Baumol’s cost disease. When new technologies come along that improve productivity in various industries, they adopt those technologies to save money; higher ed adopts those technologies as pure cost, to ensure that students are ready to use them. That bakes some cost escalation into the cake.

Out of morbid curiosity, I decided to compare the total cost of attendance of Williams College right after I graduated to the total cost of attendance at Rutgers now. To make it apples to apples, I had to assume full-time undergraduates, and to make it fair, I assumed in-state residency for Rutgers.

Williams College, 1990: $19,995. That $45,825 now.

Rutgers University, 2023: $36,271 on-campus, or $47,015 off-campus.

A student attending the in-state public flagship and living off-campus pays, after inflation, more than a student who attended what was then (and is still now) one of the most expensive private colleges in the country in 1990. Yes, Pell has increased, but most students don’t receive Pell. Now the public option is as expensive as the private one used to be, and the private one hovers around $80,000 per year. That’s higher than the median annual household income in the U.S.

Some people read these numbers as saying that higher education is out of control. Parts of it are, though the folks who make those arguments typically fail to account for Baumol’s disease, the cost of new technology, increased expectations for counseling and the like.

I draw a different set of conclusions.

First, the complaints that current generations of students have about college being harder to afford than it used to be are broadly correct and, if anything, understated. Massage the numbers as you will—when even the public option has become unaffordable, something has gone fundamentally wrong. Possible policy responses vary—I’m a fan of setting the interest on student loans at zero—but the need to cut students and families some slack is clear.

Second, if we want to encourage education, we need to pour resources and support into the lowest-cost sector: community and regional four-year colleges. Free community college programs help, as do subsequent bridge programs to four-year colleges. Institutionally, the key piece here is ensuring that the colleges have the operating revenue they need to make access worthwhile in the first place. That means fully funding dual enrollment, for example.

The third part is the hardest. Colleges have some say over tuition, fees and direct costs, but they don’t control local rents. When they don’t supply four years of on-campus housing—which very few do—then you get off-campus costs like the one at Rutgers. We don’t usually include discussions of housing and housing policy in discussions of higher ed costs, except for lazy invocations of lazy rivers. But from a student’s perspective, high rent is just as bad as high tuition. Colleges can move to OER to save students money on textbooks, but if local landlords gobble up the savings, students are still strapped.

So yes, it’s possible to quibble with Warren’s original statement, but its broader meaning was largely correct. College is harder to afford than it used to be. And only part of that has anything to do with colleges themselves.