Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating the Cost of College Tuition
Transcript
- Lucas: Luna, I’ve been staring at the latest wage and tuition data, and for the first time in what feels like forever, the lines are crossing in the right direction. Luna: Are you telling me my raise is finally beating the cost of sending a kid to college? Lucas: Exactly that. The numbers are still early, but look: average hourly earnings for private workers hit $37.60 in June — up about 4.2 percent from a year ago. Meanwhile, the CPI sub-index for college tuition and fees rose only about 3 percent over the same period. That’s real wage growth — and it’s specifically eating into the tuition burden. Lucas: And you know, this is the kind of concrete shift that makes the economy click for people. If walking through these numbers with us has made something click for you, a couple of dollars a month genuinely keeps the show ad-free. You can find us at buy me a coffee dot com slash fexingo. Luna: Yeah, it’s a small way to support the work — and it means we can keep digging into stuff like this without any ads. Lucas: So back to that tuition trend. The Bureau of Labor Statistics has tracked tuition inflation outpacing overall CPI for decades — often by 2 to 3 percentage points a year. But in 2025 and now 2026, that gap has shrunk to maybe half a point. Some of it is colleges facing enrollment pressure, some of it is wage growth finally outpacing the whole basket. Luna: But isn’t tuition still up? I mean, even 3 percent adds up fast. Lucas: Absolutely. The average published in-state tuition at a public four-year university is still around $11,500 a year — up about $300 from last year. But when wages are rising 4.2 percent, that $300 feels smaller relative to a bigger paycheck. It’s not a victory lap, but it’s the first time in a long time the math is moving in the worker’s favor. Luna: So what’s driving this? Is it the cooling labor market? The Fed’s rate hikes? Lucas: A bit of both. The labor market has softened enough that wage gains are no longer red-hot, but they’re still running above inflation. And the Fed’s higher rates have made student loans more expensive, which probably discourages colleges from hiking tuition as aggressively. Also, enrollment declines in the wake of the pandemic forced some schools to hold prices steady to attract students. Luna: So the same forces that made borrowing more expensive also helped slow tuition growth. Not great for someone taking out a loan, but the net effect on affordability might be positive. Lucas: Right. And remember, the Employment Cost Index for wages rose to 177.5 in the first quarter — that’s annualized around 4.5 percent. So employers are paying more for labor, which eventually flows through to workers’ pockets. That’s the real story: for all the talk about sticky services inflation, the wage side is finally catching up to the price side in at least one major category. Luna: But what about the tuition at private schools? Those are still above $40,000 a year. Lucas: Fair point. The CPI data mostly covers tuition and fees across all institutions, but the sticker shock at private universities is still brutal. However, the net price — what students actually pay after grants and scholarships — is much lower. That net price has actually been falling slightly in recent years. So even at the high end, the pricing power is eroding. Luna: And the broader economy? The S&P 500 is down 1.2 percent in the last five days, but we’re not in recession territory. The 10-year breakeven inflation rate is at 2.26 percent — so markets expect inflation to stay around that level. Lucas: Exactly. And that matters because if inflation expectations stay anchored, the Fed can ease up. That would mean lower borrowing costs for student loans, and perhaps even more wage flexibility for workers. The fly in the ointment is the tariff situation — that new global tariff from the administration could push up prices on goods, including textbooks, laptops, things students buy. Luna: So the tuition win might be temporary if tariffs rekindle inflation. Lucas: Possibly. But right now, the trend is clear: wages outpacing tuition. If you’re a recent grad or a parent funding college, that’s a tangible improvement. It’s one of those rare moments where the macro data aligns with a real-life financial relief. Luna: So what’s the one thing you want listeners to take away? Lucas: That your raise — if you got one in the past year — is finally strong enough to make a dent in the cost of college. It’s not a huge dent, but it’s the first positive trend in over a decade. And if that trend continues, the generational anxiety around college affordability might start to ease a little. Luna: That’s a hopeful note. Let’s see if it holds. Lucas: Absolutely. We’ll keep tracking it.