Costs for colleges expected to rise

Ret Boney | May 7, 2009

Thanks to lower expenses in a several key areas, U.S. colleges and universities will experience a significantly lower inflation rate this year than last, according to new data estimates.

Based on a new methodology that calculates data based on a June 30 year-end, the Commonfund Institute's Higher Education Price Index estimates inflation for the sector will be 2.8 percent for fiscal 2009, down from 5 percent in fiscal 2008.

That's one bright spot in an otherwise bleak landscape for the nation's higher-education sector, says Bill Jarvis, managing director of the institute.

"College and universities are facing very difficult fiscal situations as a result of declines in endowments and household wealth, which affects the ability to pay tuition," he says. "So requests for financial aid are up. If costs are going up at a lower rate, that is one less source of pressure for university budgets."

The Higher Education Price Index is similar to the Consumer Price Index, but calculates the increase in prices of good and services specific to higher education.

The index includes prices for faculty salaries, administrative salaries, clerical costs, service employees, fringe benefits, miscellaneous services, utilities, and supplies and materials.

The projected decrease in inflation this year is due in large part to slower increases in faculty salaries and fringe benefits, as well as utility costs that are projected to have declined 8.6 percent this year compared to a jump of 14.2 percent last year.

"These pretty directly reflect general economic and market conditions," Jarvis says. "Virtually every indicator is advancing more slowly, or is decreasing, as compared to last year."

Data used in the calculations will continue to trickle in through the end of the fiscal year, so the 2.8 percent inflation estimate likely will change by the end of the year, he says.

About 27 percent of U.S. colleges and universities use the index, says Jarvis, with more than half using it for planning and budgeting purposes.

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