Inflation woes are hitting everyone these days, but is it really something you need to care about if your tuition cost is already settled? Ideally, inflation woes won't derail your degree progress, but you should still learn about how inflation can affect your student budget.
The annual inflation rate rose to 6.5% in October 20221, making it the highest level of inflation in 30 years.2 The bad news is that rates are predicted to keep rising as the cost of groceries and gas continues to climb. Even if your degree costs are sealed in, inflation can affect many other areas of your budget, such as housing, groceries and transportation. However, there are a few things you can do to keep your budget stable and fight inflation. Read on to learn how.
The consumer price index (CPI) or, in simpler terms, the price of goods, has risen 6.9% since last year.3 There are several main causes of inflation, including dealing with the aftermath of the pandemic and with supply chain issues. Not only are prices higher due to shortages, but even products or groceries in abundance are going to cost more because they're more expensive to produce and transport.
How is inflation affecting students? These price increases then make the value of money not go as far as it did last year. However, you might not feel the inflation impact everywhere. For example, paying a few cents more for certain groceries or a little bit extra for your favourite streaming services won't deflate your budget. You'll instead feel it with goods you rely on often that have been hit by the biggest price changes, such as the price of gas.
To offset the rate of inflation, the central bank, the Bank of Canada, will need to hike interest rates.4 Interest rates have gone up since the pandemic, and it will affect students' purchasing power for car loans and refinancing student loans. The higher the interest rates for loans, the higher the amount borrowers will have to repay, taking it longer to repay. However, with a proper financial strategy in place all of that is manageable, as long as you anticipate the extra costs from the start.
University tuition rates have been outpacing inflation rates since 2017 and are predicted to keep up their steady 2 to 3% annual growth. In 2018, the cost of a four-year degree with residence was $85,454 and in 2037, the cost for the same degree and residence will likely be $127,446.5
Even in the case of deflation, or a time of weak economic growth, high tuition rates will still be the norm. While this current level of high inflation might not affect the degree you are pursuing significantly, it can make it a lot more expensive to pursue postgrad degrees and certifications. You might start seeing higher prices in necessary costs that surround your degree, too, such as campus food plans, books and lab fees.
Rising inflation rates touch almost every other daily expense, including university tuition costs. The causes of inflation in the higher education sector happen for a number of reasons, some of which are listed below.
Even if you can't control the cost of things, you can control your budget. Having a tight handle on how you spend your money as a student will benefit your finances after university.
How do students manage inflation? As inflation increases, you need to be creative with handling the cost of living expenses. Here are a few impactful ways you could consider to make your student budget go further:
Despite inflation rates changing, it's important to stay positive and prepare for the changes in your student budget and make smart financial decisions. That last one is true regardless of what the rates are doing.