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Expenses for U.S. colleges rose 4% in fiscal year 2023, a slower pace than the 5.2% increase the prior year, according to new data from Commonfund, an asset management firm that tracks inflation in the higher education sector. 

Although the increase in the Higher Education Price Index (HEPI) rate in FY2023 was lower than in 2022, it is more than double the 1.9% HEPI rate in 2020, the report said. 

Fiscal year 2023 covers the period from July 1, 2022, to June 30, 2023, and coincides with the budget year of most institutions of higher education. 

Year over year, inflation rates in FY2023 surpassed those of FY2022 in four of the eight components tracked by HEPI (faculty salaries; administrative salaries; fringe benefits; miscellaneous services), with the most pronounced increases in both faculty salaries and administrative salaries.  

Faculty salaries, which are the highest weighted HEPI component making up 35% of the index, rose from 2.1% in FY2022 to 4.0% in FY2023. Administrative salaries increased from 2.9% to 4.1% during the same period. 

The four components that saw a decrease in inflation rates in FY2023 were clerical costs, service employees, supplies and materials, and utilities. The most dramatic changes came in the utilities category, falling from the FY2022 historical high rate of 43.1% to a deflationary -3.7 % in FY2023. Supplies and materials fell from 21.5% to 7.3%. 

Other changes between FY2020 

  • Fringe benefits up to 2.8% 
  • Miscellaneous services up to 4.9% 
  • Clerical costs down to 5.0% 
  • Service employees down to 6.4% 

A more accurate indicator of cost changes for colleges and universities than the Consumer Price Index (CPI), HEPI is used primarily to project future budget increases required to preserve purchasing power, the report said. Comparing HEPI and the CPI, the former showed costs rising 4.0% in FY2023 while the CPI rose 6.3%. This marks the second straight year that CPI has exceeded HEPI, the report said.