The Truth is Powerful
Higher Education Tuition Hikes Insufficient to Offset Inflation Pressures
Fitch Ratings-Chicago/New York-14 July 2022: Inflation’s effects will weigh on college and university budgets over the next few years, Fitch Ratings says. Inflationary pressures are reflected in tuition increases, lower capital outlays, less debt issuance and reduced endowment spending power, which will have longer term repercussions for operations and could also negatively affect enrollment. Schools will need to continue managing expenses or supplement revenues to preserve their budgetary flexibility.
Fitch forecasts average annual inflation of 7.8% and 3.7% for 2022 and 2023, respectively. Higher education wages increased in 1Q22 by around 3% yoy, slightly lower than broader wage trends amid a tight labor market. Increased wages are difficult to lower once in place and will have a significant impact on operating budgets, with personnel costs comprising an average of about 30% of a college’s expense base.
Tuition has increased over 5% per year since 1980, with the exception of 2020-2021 and 2021-2022, when tuition was held flat. Fitch expects larger tuition hikes as universities try to keep pace with higher costs and continue to recover from foregone revenues and other pandemic impacts. We expect net tuition growth will remain constrained at best, with more challenged institutions facing declines.
Tuition price increases may […]