Wednesday, June 25, 2014

The Price of Education (revisited)

Back in 2011 I wrote blog entry on how the average cost of a four year degree had tripled in inflation adjusted dollars from 1980 to 2010. So has there been any change in the three years since? For the most part, not really.

The following table from provides the average tuition/fees and room/board charges from 1971-72 to 2013-14. The data is provides in inflation adjusted 2013 dollars.

As the bottom line indicates, over the last five years average tuition and fees increased another 27%. I seem to remember reading an article within the last year which indicated there was a slowdown in tuition increases which this data doesn't jive with, so I took a glance at the full report and found that there has been a trend of decreasing annual rate increases. The one year change from 2009-10 was 9.5%, 2010-11 6.5%, 2011-12 4.7%, 2012-13 3.1%, 2013-14 0.9%. Does this mean tuition has now leveled out and will just keep pace with inflation? Not necessarily. If you look at the data from my original post you find that annual rate increases do jump around. For instance, in 2008-09 the percentage change was 0.8% only to be followed with a whopping 9.3% increase the next year.

Even if education prices level out it is already an incredibly expensive investment and the young people who have to decide whether to make it are typically ill equipped to do so. Though many of them have financially experienced, caring parents who will help guide them along, it is probably true that just as many do not. And the complete lack of financial/accounting education in high school means that these youngsters typically have no ability to understand the long term effects of having this amount of debt.

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