As inflation rates continue to rise, universities are feeling the effects in several ways—from increased costs for labor, food, and energy to declining enrollments.
According to the Bureau of Labor Statistics, May 2022 saw the fastest increase in inflation since December 1981, with prices rising 8.6% from a year ago. Right now, tuition is rising slower than the rate of inflation. As costs continue to increase at a rapid rate, universities will have to make some tough choices in order to keep up. One option is to increase tuition. However, this is not a viable long-term solution as it will only serve to further discourage potential students.
Another option is to cut costs. This can be done in many ways, such as reducing the number of faculty or staff, cutting back on programs or services, or increasing class sizes. No matter what approach universities take, navigating rising inflation is becoming a long-term challenge. With enrollments declining, universities will have to be careful not to make too many cuts as this could harm the quality of education they are able to provide.
Here are just a few examples of how inflation is affecting universities across the country.
In addition to increased costs, universities are also facing declining enrollments. The latest data from the National Student Clearinghouse Research Center shows that student enrollment decreased by 4.1% in Spring 2022 compared to Spring 2021.
In addition to rising tuitions, interest rates for student loans are also increasing. As the federal government raises interest rates as a way to combat inflation, students who take out loans to pay for their education end up owing more money when they graduate. According to the Treasury Department, student loan interest rates will jump from 3.73% to 4.99% for the 2022-2023 school year.
Increased operating costs
Universities are also seeing an increase in the cost of operating. From food and energy to labor and other utilities, colleges are feeling the squeeze of inflation. The cost of food is one area that has seen a significant increase. The USDA reports that the cost of food away from home, which includes college dining halls, is 7.4% higher than last year.
The cost of energy is also on the rise too. Universities are seeing an increase in the cost of electricity, natural gas, and fuel oil to run campus buildings and transportation. Lastly, labor costs are increasing as universities compete for a limited pool of qualified workers. The tight labor market is driving up wages, which in turn increases the cost of operating for universities. All of these increases have a direct impact on the bottom line of universities. As costs continue to rise, universities will have to make some tough choices in order to keep up.
What can universities do?
It’s frustrating to see the cost of higher education continue to rise while enrollments are declining. But there are a few things universities can do to mitigate the effects of inflation. Universities may choose to cut back on programs or services, for example. Or, they could take a different approach and invest in online education. This would allow them to reach a larger audience and potentially offset some of the costs associated with traditional higher education.
No matter what approach universities take, navigating rising inflation is becoming a long-term challenge. There are a few steps universities may immediately take to mitigate the effects of inflation:
- Reduce costs by cutting back on programs or services, increasing class sizes, or reducing the number of faculty or staff.
- Increase tuition to cover the increased costs of operating.
- Focus on increasing endowments and strategically use them to provide a more reliable stream of earnings
- Reduce expenses by cutting back on travel, entertainment, and other non-essential items.
Whichever steps universities take, it’s clear that inflation is a challenge that isn’t going away anytime soon. For now, universities will have to continue to adapt and adjust in order to keep up with the rising costs.
Stephen Rozo is the founder of MoneyPeoples.com. He has spent more than 10 years finding ways to make an income online and now shares his experiences and research about the online gig economy.