Monday, June 26, 2017

Education inflation appears to be converging with general inflation, at least for now


For many years, the cost of education has risen steadily and significantly more than the general level of prices. This trend has led to numerous complaints that education is out of reach; it has also led to a boom in student loans. This graph clearly shows how education inflation (blue line) has been above general inflation (red line) every year since 1994. And, again, quite significantly so.

The past few observations, however, exhibit a marked reversal, with one observation even showing CPI inflation higher than education inflation. Does this mean education will become relatively more affordable now? It’s difficult to say from current data, especially since there have been two other episodes, in 2008 and 2011, when the two series converged only to diverge again. Time will tell if this latest development is pomp or circumstance.

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