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Business costs for colleges rose 2.7% in the 2021 fiscal year

Business costs for colleges rose 2.7% in the 2021 fiscal year

Higher Ed Dive

December 16, 2021

Natalie Schwartz

Dive Brief: 

  • Business costs for U.S. colleges rose 2.7% in the 2021 fiscal year, according to data from Commonfund, an investment manager that has been publishing higher education’s inflation rate since 2005.
  • Commonfund says the Higher Education Price Index, or HEPI, is a more accurate indicator of cost changes for colleges than the Consumer Price Index, or CPI, which tracks inflation more broadly in the U.S.
  • The 2.7% rate marks an increase over last year’s HEPI rate of 1.9% and is slightly above the five-year average of 2.6%. It also exceeds the CPI, which rose 2.3% in fiscal 2021, though Commonfund’s report said it’s typical for HEPI to be higher than the CPI.

Dive Insight: 

Commonfund released its annual HEPI report at a time when inflation has been grabbing national attention. The CPI rose 6.8% in November over last year, the largest annual change seen since the early 1980s. The latest HEPI rate does not yet cover the months where the U.S. CPI rate has soared.

Analysts at bond ratings agencies say these high rates are likely to drive up spending at colleges, undercutting expected revenue gains from a return to in-person learning, high endowment returns and strong state budgets. They said it’s unclear how long inflation will remain high.

The Commonfund report looks back on the higher ed sector’s cost increases during the 2021 fiscal year, which spans July 1, 2020, to June 30, 2021. It found business costs increased year over year across all eight categories HEPI tracks: faculty salaries, administrator salaries, clerical costs, service employees, supplies and materials, fringe benefits, miscellaneous services, and utilities.

Half of the categories saw rate increases in fiscal 2021 that were higher than their five-year averages: utilities, supplies and materials, fringe benefits and service employees. The rest grew at rates below the five-year average.

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