Higher Education Price Index Barely Rises, Thanks to Drop in Utility Costs and Flat Salaries

September 16, 2010

Plummeting utility prices and stagnant salaries left costs at colleges and universities nearly unchanged in 2010, compared with the previous year, according to an annual index released today by the Commonfund Institute.

The Higher Education Price Index, which measures eight kinds of costs incurred by colleges and universities, rose 0.9 percent nationwide in the fiscal year that ended on June 30, the smallest increase in its history.

The salaries and benefits of faculty and staff members account for 85 percent of the index, known as HEPI, while utilities, supplies, materials, and other costs make up the rest.

Although utilities are a small portion of the index, their cost fell so dramatically in 2010 that it drove the entire index down. Utility costs dropped by 9.4 percent, while the costs of supplies and materials, measured together, fell by 1.3 percent.

In a fiscal year that began right after the worst of the recession, there was little increase in pay or benefits. Faculty salaries rose 1.2 percent, a rate that was less than half of last year's. Increases in administrative, clerical, and service staff salaries slowed similarly. Fringe benefits like retirement and pensions grew 2.1 percent, the biggest increase of all costs that were measured. But this was modest compared with 2009, when the cost of benefits went up 3.6 percent. Master's-degree-granting institutions even saw the cost of benefits go down.

Many colleges and universities take HEPI into account when making important calculations. According to the Commonfund Institute, one-third of higher-education institutions use the index, most frequently to set budgets and tuition rates.

While a 0.9-percent jump in the index means that the costs it measures, taken together, are still going up, the past year's gain was the smallest increase in higher-education costs since the index began in 1961. In the past decade, the yearly increase in the HEPI has ranged from 1.9 percent to 5.1 percent.

This year's index had another notable shift: It was the first time since 1995 that the growth of higher-education costs was lower than the inflation rate. The HEPI has typically risen at a significantly faster rate than the Consumer Price Index, which is used to determine inflation. The past fiscal year was markedly different, with the CPI rising 1 percent, slightly more than the HEPI did.