Dive Brief:
- College operating costs increased 3.6% in fiscal 2025, according to the latest Higher Education Price Index, which tracks the sector’s inflation.
- “HEPI inflation rates are again elevated above what many consider the norm, set by expectations from prior decades,” according to a report from Commonfund Institute, which is responsible for the index. For the past five years, the HEPI rate has been above the prior decade’s annual average of 2.2%.
- HEPI’s latest inflation rate continues a period of elevated cost increases for colleges and universities that began with the COVID-19 pandemic. The latest annual price increase of 3.6% is higher than the prior year’s rate of 3.4%. However, it’s much lower than the most recent peak of 5.2% in fiscal 2022.
Dive Insight:
HEPI found cost increases for colleges outpaced those tracked by the Consumer Price Index, which showed inflation for the general public rising 2.6% in fiscal year 2025. HEPI’s inflation rate has been higher than the CPI’s in nine out of the past 11 years.
The cost increases are putting immense pressure on many colleges. Some institutions that have closed in recent years have even cited inflation as one of the reasons they’re shutting down.
For others, the price hikes mean shrinking margins and the need for budget cuts. All three major credit rating agencies issued a gloomy 2026 outlook for either nonprofit colleges or the entire higher education sector, with each citing rising costs as a factor.
Out of eight cost categories that the HEPI tracks, administrative salaries grew the most in fiscal 2025, increasing by 4.8%.
Similarly, faculty salaries rose 4.3%, the highest rate recorded since HEPI began tracking inflation in the category in 1998. Inflation in faculty salaries has only reached 4% or higher two other times — a 4% increase in 2023 and a 4.1% increase in 2008. Faculty salaries have the most impact on the index.
Increases for the other categories were:
- 4.2% for utilities.
- 4.1% for service employees.
- 3.7% for miscellaneous services.
- 3.3% for clerical costs.
- 2.4% for fringe benefits.
Only supplies and materials saw deflation, with a 0.2% decline in costs.
Across institutions, two-year public colleges saw the highest overall cost increases at 4.6%. No other institution type had inflation above 4%. Part of this was due to inflation in faculty salaries at those institutions reaching 8.7% in fiscal 2025 — by far the highest out of any institution type.
Overall, public institutions had higher increases in faculty salaries than public colleges, 4.7% versus 3.6%. This breaks with the trend of private institutions more often seeing higher annual inflation in faculty costs, according to the Commonfund Institute report.
