CPI is a lie.
One of the recurring comments I heard at the NASFAA national conference was tuition increasing at twice the rate of inflation.
This is a lie.
It’s not a lie because NASFAA or any of the presenters intended to mislead the audience. It’s a lie because the number itself, CPI, is not an accurate measure of inflation.
CPI stands for the Consumer Price Index. It’s a measure intended to show the effects of inflation on the average consumer by measuring the price of a basket of goods over time.
Here’s why CPI is a lie:
CPI excludes food and energy.
Now, if you never need to eat, you never need lighting, electricity, heat, or energy to go anywhere, then yes, CPI is probably an accurate measure of inflation’s effects on you. For the 99.999% of us that are not self-powered Terminator robots, CPI is a lie. Food and energy are some of our largest expenses, and certainly once you discount tuition and housing, food and energy are our largest expenses.
If you include food and energy - food prices up in some cases 50% or more, energy prices up even more than that, then suddenly the Consumer Price Index leaps from somewhere in the 3% range to well over the 16% range - and suddenly, college cost increases look downright reasonable compared to the spiraling prices of virtually everything else.
Economists will say that food and energy are too volatile, which is why they were left out of CPI, and that eventually, energy costs will work their way into consumer product prices anyway. That may be true to an extent, but if food and energy are consuming huge chunks of the consumer’s budget, everything else will not rise in price accordingly, because consumers will be diverting income to necessities. Logically, a drop-off in demand will mean lesser price increases on those goods.
The unfortunate reality is that prices across the board are up and rising dramatically every day for the time being. As long as the conditions which have led to the current market prices persist - conversion of food into fuel, war in energy-producing regions, speculation in commodity markets, collapse of financial markets - the prices driven by those conditions will persist.
This will unfortunately and inevitably mean that some families will need to make extremely difficult choices in the months ahead. Some may even be forced to choose between necessities and higher education. I’d strongly encourage every college student, whether you need them or not, to actively pursue scholarships and grants aggressively. Grab a copy of the free eBook I’ve written, Scholarship Search Secrets, to assist you in this task.
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