Inflation is real. In March of 2023, DePauw raised tuition and fees by 3% for the current school year, with Vice President of Finance and Administration Andrea Young citing inflationary pressures as a significant factor. We know things are getting more expensive, yet many are unaware of what inflation really is.
Inflation is defined as the general increase in prices over time. Data released from the Bureau of Labor Statistics on Wednesday, September 13, shows the Consumer Price Index (CPI) up 3.7% annually and up .6% from July. CPI measures price levels and is used as a key gauge of inflation. Inflation peaked post-COVID-19 at an annual rate of 9.1% in June 2022 and has fallen sharply over the past year.
But does this mean that prices have fallen since then? A common misconception is that a decrease in the annual inflation rate means a decrease in the price level. This is not always true. A fall in the inflation rate can mean prices are still rising, just at a slower rate. The CPI has actually risen 3.26% since June 2022.
However, this trend is to be expected. The Federal Reserve (the central banking system of the United States) typically targets a 2% annual inflation rate. Inflation is still higher than we would like, but we are moving in the right direction.
The main causes of inflation are increased consumer and government spending, wage increases, and supply chain disruptions–all get credited to different extents depending on who you ask.
Inflation calculations are not perfect. To measure inflation economists often use something called CPI: where the price of a fixed "basket" of goods and services that represent the typical consumer's spending patterns is monitored over time. However, consumers' spending tendencies vary, and what you spend your money on may be different than the typical basket. Inflation doesn’t change the price of everything at the same rate.
Prices are expected to rise a bit over time, as this is a sign of a healthy economy. When an economy is growing, businesses expand, employment levels rise, and consumers have more money to spend. This extra money in the pockets of consumers raises the demand for goods and services. Businesses raise their prices as a result, contributing to inflation.
So what does inflation mean for you? In addition to tuition increases, textbooks, housing, food, and transportation price increases also impact college students. Those working part-time jobs may not see their wages growing along with inflation, making it harder to support their education.
Coping with inflation as a college student can be challenging, but there are some ways to help manage it. On the individual level, it’s important to budget effectively. Define your financial goals and track your income and expenses. Prioritize your essential costs while also maintaining an emergency fund to handle unexpected expenses. On a larger scale, a conversation with parents or professionals about savings and investments can be beneficial. Explore all available financial aid options available to you: scholarships, grants, and student loans may all be options. Remember that everyone’s financial situation and academic journeys are different– what works for one person may not work for another.
Inflation impacts our lives. Gaining a better understanding of how inflation works and staying updated on inflationary trends is undoubtedly important. By staying financially informed and taking proactive steps, we can mitigate inflation’s impact on our education.