‘households vary dramatically in the impact that inflation has upon them’

by Grace

Inflation disproportionately affects specific groups of people, with families paying college tuition among those who have been hit the hardest.

Inflation has been tame in recent months. However, the one thing we can be certain about is this: Increases in inflation will have a painful effect on lower income households, those on fixed incomes, those with higher ratios of transportation costs, college tuition and any household whose discretionary spending is more dream than reality.

20130117.COCCollegeInflationCompared1

(Notice that both college and apparel costs follow a pattern coinciding with seasonal volatility.)

As explained by Doug Short, with its recent quantitative easing “the Fed has been trying to increase inflation, operating at the macro level”.  Here are his comments on inflation in the higher education sector.

The BLS weights College Tuition and Fees at 1.695% of the total expenditures. But for households with college-bound children, the relentless growth of tuition and fees can cripple budgets. Often those costs get bundled into loans that saddle degree recipients with exorbitant debt burdens. Consider the following numbers from the CollegeBoard.com website:

  • Public four-year colleges charge, on average, $8,240 per year in tuition and fees for in-state students.
  • Public four-year colleges charge, on average, $20,770 per year in tuition and fees for out-of-state students.
  • Private nonprofit four-year colleges charge, on average, $28,500 per year in tuition and fees.

Of course, Mr. Bernanke would point out that, with a healthy dose of Core Inflation (extended of course to wages), those debt-burdened college grads will pay down the loans with inflated dollars.

Other factors in play are slowing down the skyrocketing costs of college, so the worst of the “inflation nightmare” may be over for a while.

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