The statue of John Harvard, founder of Harvard College, is seen at Harvard Yard in Cambridge, Massachusetts. AP
The statue of John Harvard, founder of Harvard College, is seen at Harvard Yard in Cambridge, Massachusetts. AP
The statue of John Harvard, founder of Harvard College, is seen at Harvard Yard in Cambridge, Massachusetts. AP
The statue of John Harvard, founder of Harvard College, is seen at Harvard Yard in Cambridge, Massachusetts. AP

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Paying for Harvard now cheaper thanks to decades-high inflation

Over half of Harvard's students receive need-based scholarships

Bloomberg

April 29, 2022

  • English
  • Arabic

Parents paying the full cost of Ivy League tuition bills are getting a little relief — and they can thank inflation.

The cost to attend an elite school in the coming academic year is poised to fall by an average of about 5 per cent, when adjusted for the rate of price increases in the broader economy, a Bloomberg analysis of tuition data showed.

The grave of John Harvard, founder of Harvard University who died in 1638, stands in the Phipps Street Burying Ground, in the Charlestown neighbourhood of Boston, Massachusetts. Reuters
The grave of John Harvard, founder of Harvard University who died in 1638, stands in the Phipps Street Burying Ground, in the Charlestown neighbourhood of Boston, Massachusetts. Reuters

That’s the biggest drop in at least a dozen years.

The decline is being driven by a quirk of the economy: sticker prices at schools are rising less than the general rate of inflation. The eight Ivy League schools, as well as Stanford University and MIT, are planning to raise tuition an average of 3.3 per cent for the 2022-2023 school year. By contrast, inflation is running at 8.5 per cent.

Among those schools, Yale plans the largest tuition increase, at 4.3 per cent. Factoring in inflation, that works out to a drop of 4.2 per cent. The figures exclude other expenses such as room and board.

For decades, tuition has risen faster than prices, making college costs a flashpoint. Harvard tuition has surged 56 per cent since the 2009-2010 year, and the coming school year will cost undergraduates almost $53,000.

Even so, few parents pay full price at these schools, which are among the most generous in offering financial aid. Harvard points out that about 55 per cent of students receive need-based scholarships and 20 per cent pay nothing to attend.

Dubai College's reception building in 1988. All photos: Dubai College
Dubai College's reception building in 1988. All photos: Dubai College
Pupils during art class in the 1980s.
Pupils during art class in the 1980s.
The school's first bus pictured in 1980. Dubai College is one of the city’s oldest schools.
The school's first bus pictured in 1980. Dubai College is one of the city’s oldest schools.
The science room in the 1980s.
The science room in the 1980s.
The old sports court in 1983.
The old sports court in 1983.
Pupils conduct experiments in a science class.
Pupils conduct experiments in a science class.
Plot B141 in Umm Suqeim pictured in 1980.
Plot B141 in Umm Suqeim pictured in 1980.
Staff quarters on campus under construction.
Staff quarters on campus under construction.
The beach road outside campus in Umm Suqeim in 1980.
The beach road outside campus in Umm Suqeim in 1980.
The physical education changing room block, in 1989.
The physical education changing room block, in 1989.
The campus in 1994 after extensions in previous years.
The campus in 1994 after extensions in previous years.
The school's buses in the 1980s.
The school's buses in the 1980s.
Dubai College's entrance in 2000.
Dubai College's entrance in 2000.
The swimming pool on campus in 1984.
The swimming pool on campus in 1984.
Foundations of the new campus block in 1982.
Foundations of the new campus block in 1982.
Dubai College as seen from above in 1982.
Dubai College as seen from above in 1982.
The Sixth Form Centre under construction in 1991.
The Sixth Form Centre under construction in 1991.

A Bloomberg survey forecasts inflation will fall to 5.7 per cent in the fourth quarter of this year, a hefty drop from the current rate but still well above pre-pandemic levels.

Should inflation prove sticky, schools could come under pressure from faculty and staff to increase wages so that their pay keeps up with rising costs. That would cut at the heart of what colleges spend their money on, said Phillip Levine, an economist at Wellesley College.

“If we observe over the course of the next year that wage pressure expands, that will drive up university costs and then they’ll have to start increasing tuition at a faster rate,” said Mr Levine, whose recent book, A Problem of Fit, focuses on the complexity of college pricing.

Which means families probably shouldn’t rest easy.

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What sanctions would be reimposed?

Under ‘snapback’, measures imposed on Iran by the UN Security Council in six resolutions would be restored, including:

  • An arms embargo
  • A ban on uranium enrichment and reprocessing
  • A ban on launches and other activities with ballistic missiles capable of delivering nuclear weapons, as well as ballistic missile technology transfer and technical assistance
  • A targeted global asset freeze and travel ban on Iranian individuals and entities
  • Authorisation for countries to inspect Iran Air Cargo and Islamic Republic of Iran Shipping Lines cargoes for banned goods

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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While you're here

The Travel Diaries of Albert Einstein The Far East, Palestine, and Spain, 1922 – 1923
Editor Ze’ev Rosenkranz
​​​​​​​Princeton

Updated: June 21, 2023, 9:01 AM
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