Paying for Harvard now cheaper thanks to decades-high inflation

Over half of Harvard's students receive need-based scholarships

The statue of John Harvard, founder of Harvard College, is seen at Harvard Yard in Cambridge, Massachusetts. AP

Parents paying the full cost of Ivy League tuition bills are getting a little relief — and they can thank inflation.

The cost to attend an elite school in the coming academic year is poised to fall by an average of about 5 per cent, when adjusted for the rate of price increases in the broader economy, a Bloomberg analysis of tuition data showed.

That’s the biggest drop in at least a dozen years.

The decline is being driven by a quirk of the economy: sticker prices at schools are rising less than the general rate of inflation. The eight Ivy League schools, as well as Stanford University and MIT, are planning to raise tuition an average of 3.3 per cent for the 2022-2023 school year. By contrast, inflation is running at 8.5 per cent.

Among those schools, Yale plans the largest tuition increase, at 4.3 per cent. Factoring in inflation, that works out to a drop of 4.2 per cent. The figures exclude other expenses such as room and board.

For decades, tuition has risen faster than prices, making college costs a flashpoint. Harvard tuition has surged 56 per cent since the 2009-2010 year, and the coming school year will cost undergraduates almost $53,000.

Even so, few parents pay full price at these schools, which are among the most generous in offering financial aid. Harvard points out that about 55 per cent of students receive need-based scholarships and 20 per cent pay nothing to attend.

A Bloomberg survey forecasts inflation will fall to 5.7 per cent in the fourth quarter of this year, a hefty drop from the current rate but still well above pre-pandemic levels.

Should inflation prove sticky, schools could come under pressure from faculty and staff to increase wages so that their pay keeps up with rising costs. That would cut at the heart of what colleges spend their money on, said Phillip Levine, an economist at Wellesley College.

“If we observe over the course of the next year that wage pressure expands, that will drive up university costs and then they’ll have to start increasing tuition at a faster rate,” said Mr Levine, whose recent book, A Problem of Fit, focuses on the complexity of college pricing.

Which means families probably shouldn’t rest easy.