Dive Brief:
- Costs for operating a college rose 3.4% in fiscal 2024, according to the latest Higher Education Price Index from the Commonfund Institute.
- The price increases outpaced Commonfund’s preliminary projections this spring of 3% for the year. However, the HEPI showed that inflation has slowed more than half a percentage point from fiscal 2023 and is down nearly 2 percentage points from 2022’s 5.2% inflation rate.
- Utility prices and those for supplies and materials slowed the most significantly, after recent years of volatility in those areas. While costs for institutions are cooling, “there is an ongoing trend of inflation rates remaining elevated compared with the previous decade,” Commonfund said.
Dive Insight:
Any slowdown in expense growth is welcome news for colleges. But that doesn't translate to lower prices, and costs are still at painful levels following past spikes. Those costs are made all the more painful if stagnant or falling enrollment constrains revenue.
Many colleges are grappling with those issues — hence the frequent laments about inflation this year from struggling and downsizing colleges.
Higher ed inflation once again surpasses consumer price spikes
Running a college has always been expensive. For roughly the past four decades, the HEPI has outpaced the Consumer Price Index in most years. One reason is that higher ed is a labor-intensive industry, with professional faculty and staff that come with relatively high salaries given their education levels.
During the pandemic era of inflation, that trend reversed briefly. But in fiscal 2024, the HEPI once again outpaced CPI, though just by one-tenth of a percentage point.
“This is a return to the norm, as HEPI has exceeded CPI in eight of the past 10 years and historically HEPI exceeds CPI,” Commonfund said.
Commonfund calculates HEPI using data on the cost of employee salaries, utilities, supplies and materials, fringe benefits and miscellaneous services. Of those, faculty salaries are given the heaviest weighting in the index — 35% of higher ed costs. Clerical costs, fringe benefits and administrative salaries are the next heaviest weighted costs calculating the HEPI.
This year brought increases in faculty salaries, administrative salaries and fringe benefits that were above the five-year averages for those categories. Faculty salaries grew 3.8% year over year, down slightly from last year’s 4% growth but higher than every other year since fiscal 2016.
Unfortunately for faculty, their purchasing power has declined in recent years when accounting for consumer inflation. For example, CPI-adjusted faculty salaries at institutions offering doctoral degrees have fallen by $10,172 over the past decade, according to Commonfund.
