Question

The tuition at Drury in 1980 was $1,427.50. Using the inflation calculator provided by the Federal Reserve Bank of Minneapolis (What is a Dollar Worth?), determine what the inflation-adjusted tuition should be for 2018. If there is a discrepancy between the inflation-adjusted tuition cost and actual tuition cost, what factors may have influenced the discrepancy?

Answer 1

As per the inflation calculator provided by the Federal Reserve Bank of Minneapolis $1 in 1980 is worth $3.04 in 2018

Thus tuition at Drury that was $1,427.50 in 1980 will be worth = $1,427.50*3.04

= $4,339.60

For the academic year 2018-19 the undergraduate tuition and fees at Drury stands at $28,515. Thus there is a clear discrepancy between the inflation-adjusted tuition cost and actual tuition cost. The factors that might have influenced the discrepancy are factors like supply and artificially inflated demand. Demand for college education is being artificially propelled through factors like availability of student’s loan and the increasing expectation that most children have a proper chance of attending college. The demand for college admissions have grown in the last decade without too much help being required in the form of government aid. The decline in state funding and slashing of college support has also led to this discrepancy. Thirdly colleges now have to spend more on infrastructure and amenities and this leads to the discrepancy. Lastly there is an administrative bloat being experienced by colleges presently. There has been a significant increase in administrative staff and this leads to higher expenses and these higher expenses can be covered only through charging higher tuition fees.