Educational Expense Trends

₹6.75 crore to raise one child in a metro city. That's the number a finance creator put out this week! Some said it's exaggerated. Some said it's about right for Mumbai or Bangalore. But the number ISN’T the point… Education inflation in India runs at 10-12% a year. General inflation? 5-6%. At that rate, costs double every 6-7 years. IIM Ahmedabad charged ₹4 lakh for its MBA in 2007. Today it's ₹27.5 lakh. That's a 7x increase in 18 years. A college program that costs ₹20 lakh today will cost ₹1.6 crore by the time a newborn turns 18. Schools raise fees 10-12% a year because they know you won't pull your kid out mid-term. And here's what nobody talks about!! Most child investment plans return 5-6%. Education inflation is 10-12%. You're saving into a plan that's guaranteed to fall short. Your parents paid for your education from their salary. You might need your entire corpus. The ₹6.75 crore number is debatable. But, the gap between what parents plan for and what they'll actually pay? That part is very real.

Everyone’s blaming the education system for being expensive. Let's see if that's the case. 👇 For the last 20 years, Indian parents told their kids the same thing: Study hard. Get into a good college. Everything will fall into place. That advice worked when education was straightforward, affordable, and predictable. But now things have shifted. Yes, costs have shot up. - School fees in cities like Hyderabad and Mumbai have jumped over 50% in three years. - Engineering and medical programs cost 2x more than they did a decade ago. But education costs more because education itself has changed. We’re not just paying for textbooks and exams anymore. We’re paying for access, technology, and real-world skills. - IIT Bombay now has an AI research assistant 'Co-pilot' that helps undergrads write and debug code in real time. - Universities like Amity University and Birla Institute of Technology and Science, Pilani use systems that adapt to how each student learns - faster or slower, visual or practical. - Platforms like Cuemath give instant feedback. Kids don’t wait for a teacher to check their work, they learn as they go. - Even Stanford University and Harvard University use AI grading and virtual labs to train students faster and more efficiently. A student graduating in 2030 will have access to tools, mentorship, and global connections that we couldn’t even imagine 10 years ago. So yes, tuition has gone up. But what we’re getting in return has also changed. Education today isn’t just an expense. It’s an investment that keeps growing in value and like any smart investment, it needs a plan. The real question isn’t:  “Why is education so expensive?” It’s: “How do we prepare our kids for the kind of education that’s coming?”

The nation’s best-known public universities have been on a spending spree, erecting “new skylines of snazzy academic buildings and dorms” over the past two decades, also pouring money “into big-time sports programs and hiring layers of administrators.” They passed the bill along to #students in the form of higher tuition, making the spending “inextricably tied to the nation’s $1.6 trillion federal student debt crisis. Colleges have paid for their sprees in part by raising #tuition prices, leaving many students with few options but to take on more debt.” At the median flagship #university, spending rose 38% between 2002 and 2022 (inflation adjusted) and only one school in the WSJ’s analysis, the University of Idaho, spent less. The schools paid for it in part by increasing tuition dollars. The median flagship received more than double the revenue from tuition and fees it did 20 years prior. “Even accounting for enrollment gains, that amounted to a 64% price increase for the average student, far outpacing the growth in most big household expenses.” “Public university leaders often blame stingier state funding for the need to raise tuition revenue.” But “for every $1 lost in state support at those universities over the two decades, the median school increased tuition and fee revenue by nearly $2.40, more than covering the cuts.” Behind the increase in tuition is a culture that valued unrelenting growth and raising revenue over cutting costs. “Administrators established ambitious strategic plans and tried to lure wealthy students with luxurious amenities. Influential college rankings rewarded those that spent more.” Also behind the increases was a situation where: “Many university officials struggled to understand their own budgets and simply increased spending every year. Trustees demanded little accountability and often rubber-stamped what came before them.” “These places are just devouring money,” said a former chancellor and now editor in chief at the journal Science. “Offering everything to everyone all at once is unsustainable, he said. #Universities need to focus on what their true priorities are and what they were created to do.” Much of the increase in outlays showed up in the hiring process, for administrators, faculty, coaches and finance experts. Some universities doubled the number of employees with titles of director, associate director or assistant director of communications over the last five years while also increasing the number of assistant, associate, executive and other types of deans. An economist who studies college spending and a former president at Old Dominion University found that public-university trustees approved 98% of the cost-increasing proposals they reviewed, often unanimously. In most states, he said, there hasn’t been anyone to say, “No, you can’t do that.” #technology #innovation #hype #education https://lnkd.in/gUJPwfaP

Looking at the latest IPEDS data, showing net cost to students by income band at 535 public, four-year institutions. Each dot is a single institution. (Net cost is total cost of attendance, including tuition, fees, room, board, transportation, and personal expenses, minus all grant aid from any source. So it's effectively how much a family has to come up with out of its own resources, whether savings, income, student work, or loans.) The data are for state residents and only includes those who receive Title IV aid. There is a lot to unpack here, but a couple of things should be apparent once you dive in: 1) Some institutions and some states do a much better job of making college education affordable. (Florida is remarkably good; Pennsylvania is remarkably bad in that regard.) 2) Stop having retention discussions while your lowest income students and their families are expected to pay over $10K per year on an income of $30K or less (This represents the majority of institutions shown here). 3) These numbers are also too high for those with income over $110K per year. It's a fair criticism of the data to point out that this band is very wide, so even going down a notch, to the $75K to $110K band is frightening. 4) Benchmarking might make you feel good in context, but when measured against common sense, most institutions miss the mark badly.

Higher education is one of the least price-transparent markets in the American economy. As I laid out yesterday in a hearing testimony for the U.S. Senate Committee on Health, Education, Labor and Pensions, students often have no clear sense of what they will pay until after applying—and sometimes not even then. Opaque pricing hamstrings competition, drives tuition higher, and allows colleges to capture taxpayer-funded aid rather than passing savings to students. College costs far outpace inflation. Between 1990 and 2020, average net tuition rose 93% in real terms to about $9,400 annually. This is not for lack of public investment. Federal and state governments now provide over $5,000 per student in noninstitutional aid—triple the 1990 amount—but colleges have absorbed these subsidies through higher tuition. True prices are tricky to find. “Sticker prices” bear little relation to what students actually pay. Instead, “net prices” are hidden behind complex aid formulas and often-confusing financial aid offer letters. Students typically learn their actual cost only after applying and being accepted—and sometimes not even then. Most financial aid award letters do not list an accurate net price. Colleges often obscure loans by labeling them as “aid,” and prices frequently rise for returning students who face limited transfer options. Fortunately, there are solutions on the table: 📊 Better Data: Congress could authorize the federal Financial Value Transparency initiative and pass the College Transparency Act to collect and publish student-level net price data. 📜 Standardized Financial Aid Offers: Require uniform, mortgage-style disclosure forms listing grants, loans, and clear net prices. ✅ Four-Year Price Guarantees: Mandate that institutions disclose total program costs upfront and block schools from surprising students with mid-degree price hikes. 📠Binding Net Price Calculators: Require colleges to issue and honor precise net price estimates based only on data students submit through the FAFSA; this data could potentially be aggregated into a universal net price calculator. A transparent pricing system would empower students, stimulate competition, and lower costs across higher education. Congress has tools at its disposal to help students see what college really costs before they buy. Read my full testimony here: https://lnkd.in/e6c5ZpDs

Excited to see our paper Human Capital, Unequal Opportunities and Productivity Convergence forthcoming in the Journal of Public Economics with dream team Nitin Kumar Bharti, Thanasak Jenmana, Zhexun M., Thomas Piketty, and Li Yang! We construct a new global database on public spending 1800-2025 and use it to revisit the relationship between human capital investments and economic growth in the very long run. Takeaways: 1. Large increases in human capital expenditure everywhere but huge persistent inequalities. 2. Public education expenditure per school-age individual in Sub-Saharan Africa is about 3% of the level observed in Europe and North America in 2025 at purchasing power parity, compared to 6% in 1980 and 4% in 1950. 3. Human capital expenditure strongly correlates with productivity growth, especially for public education and in poor countries. Estimated returns from our macro-historical database are around 10%, in line with micro studies. World Human Capital Expenditure database here! https://whce.world/ Paper here! https://lnkd.in/e7RMCxeD

The amount that U.S. #college students actually pay for #tuition has *declined significantly* in real dollar terms since about 2016. According to data from the College Board, average net tuition and fees (including grant aid) have dropped by 42% for in-state students at public four-year institutions and by 14% at their private counterparts. This is an encouraging trend for American students and families that, unfortunately, the media rarely seems to cover. I still see many headlines and comments about #highereducation that refer to ever-increasing costs. These outdated statements are factually incorrect or, at the very least, misleading. Let's take a look at what's happened here at The University of Texas at Austin for an example. When I joined the faculty in 2016-17, the sticker price for in-state tuition and fees was $10,092 per year. For 2024-25, it was $11,678, for an increase of 16%. But over this same period, inflation in the overall economy was 31% and household incomes in Texas rose by 36%. So in real terms, the sticker price of UT tuition has gone down considerably. But this isn't nearly the full picture. Over this same period, UT's financial aid has gotten much more generous, which has brought net tuition down even further. Thanks to amazing efforts like Promise Plus and the Texas Advance Commitment, #Texas residents with family incomes up to $100,000 can now attend UT tuition-free! The average net tuition that UT students pay is much lower than the stickier price (and perhaps it's even declined in nominal dollars?). To be fair, college #affordability is still a very real issue in the U.S. and more should be done. But a lot of good progress has been made in recent years and I wish that the public were more aware of it.

In recent months, discussions on the escalating cost of college — and subsequent debt passed onto students and taxpayers — have illuminated an #affordability crisis that is hindering the ability of individuals to get ahead in life. Paired with underwhelming and uneven student outcomes, the reality is that #HigherEd has a spending problem. Since 1970, spending from public #colleges and #universities rose from nearly $104 billion in today’s dollars to $420 billion by 2020. Altogether, post-secondary institutions now spend more than $670 billion per year — and for what? Many colleges may boast impressive campuses, state-of-the-art research facilities, and competitive athletic programs, but completion rates remain stagnant, equity gaps persist, and far too many institutions aren't delivering a strong ROI to their students. It’s time to flip this paradigm on its head. In my latest with Michael Horn for Deseret News, we share how bright spots including Western Governors University, Brigham Young University - Idaho, Southern New Hampshire University, and others are controlling costs and delivering value through intentional design: https://lnkd.in/g_ZzdYky

Make it make sense. The cost of tuition + room + board is 2.5X higher today than in 1980, all adjusted for inflation.The quality of education isn’t higher. The accommodations aren’t better. So why the dramatic inflation-adjusted cost of attending college? I see three drivers: 1- ADMINISTRATION BLOAT This one is easy to track. There are far more administrators in collegiate environments than there were 45 years ago. Let’s call it “non-instructor roles to student ratio. Also, increasingly, professors are more focused on obtaining research grants that the university takes a massive chunk of. This is leaving graduate students to teach a much larger percentage of classes than 45 years ago. So arguably, the quality of instruction is actually lower. 2- FRINGE STUDIES SUBSIDIZATION There are WAY more majors and fields of study to pick from today than 45 years ago. Accommodating more small fields with fewer interested student requires that the larger fields of study subsidize the smaller ones. I’m all for expanding areas of research and documenting knowledge. However, they need to find a different way to cover the cost of it rather than shoving it into tuition costs that end up being carried by all students. 3- REAL ESTATE COSTS While the quality of accommodations isn’t spectacularly different, the cost of housing has far exceeded the growth of inflation generally. Apartments, multi family units, and homes around universities have grown in value far faster than average. I also have a feeling that the modern day requirement for accommodations that be higher. eg having your own room vs sharing a room, which would also push up costs. College isn’t a sham quite yet, but it’s getting close. The math isn’t mathing very well.

“My salary is ₹50,000. My daughter’s school fees are ₹30,000. I’m basically working only to pay school fees.” A friend told me this recently. This isn’t one parent’s story. This is urban middle-class India. Two decades ago, school fees were a few hundred rupees a month. Today, in metro cities, ₹20,000–₹30,000 per month has become “normal.” Add books, uniforms, transport, development fees, events and education quietly turns into a financial trap. Here’s the real problem: Salaries have grown 2–3x. School fees have grown 6–10x. So parents cut back on healthcare. They cancel vacations. They dip into retirement savings. According to RBI data, India’s household savings rate is at a multi-decade low. This is not a coincidence. We hesitate to change schools because education is no longer just education. It has become social status, fear, and insecurity packaged with AC classrooms and fancy labels. Every parent wants the best for their child. But who decided that “best” must cost ₹30,000 a month? Education should build capability, not bankrupt families. Middle class school fees trap needs to be talked about.