Beat the College Inflation Rate

College Graduation Cap and Diploma“Inflation.” The word may put a chill in the hearts of people everywhere, but what does inflation do to college costs?

Just as the general rate of inflation represents increases in the cost of living from year to year, the college inflation rate represents increases in the cost of tuition and fees from year to year. For parents and grandparents who are saving for their children’s or grandchildren’s college education, it’s essential to choose options that keep up with college inflation.

Just like general inflation, college inflation has been steadily rising at a rate of about 7% per year according to Forbes business magazine. The college inflation trend has been going on for decades. Since 1985, the general inflation rate – as indicated by the consumer price index – has increased by 115%, while the college inflation rate has risen by almost 500%. Think of it this way: A year of college tuition that cost $10,000 in 1986 would cost more than $59,000 today.

What Drives College Inflation?

Many of the factors that drive college inflation stem from the same sources that drive general inflation, such as increasing costs for fuel, utilities and food. Colleges and universities also have overhead costs, such as the construction of additional buildings and laboratories.

The growing demand for secondary education institutions drives inflation as well. At colleges across the nation, enrollment has increased by 138% since the 1970s. As student enrollment increases, colleges hire more faculty and administrators, creating a rise in labor costs.

Factoring College Inflation into Saving for College

When planning for your children or grandchildren’s future, saving for college can play an essential role and can help avoid surprises later on.

As a general rule, estimate that college tuition rates will increase at about twice the rate of general inflation each year, or from 7% to 8%. At an 8% rate, the cost of tuition would double every nine years.

One way to play safe is by choosing a way to save for college that accounts for college inflation over the years, such as the Gerber Life College Plan1. It offers fixed, affordable payments that don’t fluctuate with the ups and downs of the stock market; stable growth over time, with a guaranteed payout of $10,000 to $150,000; and the flexibility to use the money for anything, even expenses unrelated to college.

To buy a Gerber Life College Plan1, all that a parent or grandparent has to do is put aside a fixed pre-determined amount of money each month for a set period of time. During that time the parent or grandparent also will enjoy full life insurance protection. The Gerber Life College Plan1 is the only one that also doubles as adult life insurance.

Regardless of which college savings path you choose, prepare for the rising cost of college by starting to save early, while your children or grandchildren are still young. They’ll one day thank you.

 

1Policy Form ICC09-PIE

Please note: Articles and other information included on this website are intended for the general interest of our readers, and are not intended to express the positions or views of Gerber Life or to provide or constitute, legal, financial, health or other advice. Gerber Life makes no claims, representations, or warranties as to the accuracy, completeness, or appropriateness of this general interest information for your particular circumstances. If you need legal, financial, health or other services, you should contact a duly licensed professional.

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