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- Lucas: You know that moment when you look at a bill and you're pretty sure it's going to be worse than last year, but then the number actually looks… manageable? Luna: That happens? I feel like my default expectation is the opposite. Lucas: Right? Well, it's happening right now with something that's been a punchline for decades: college tuition. The May CPI data came out a few weeks ago, and college tuition and fees were up only 2.1 percent from a year earlier. Meanwhile, average hourly earnings for private workers hit $37.50 in May—up 3.7 percent year-over-year. Luna: So wages are beating tuition. That's a flip from basically the entire 2000s and 2010s. Lucas: Exactly. For years, tuition was rising at two to three times the rate of overall inflation—and often faster than wage growth. But since about 2023, that gap has narrowed, and now in 2026, the raise is finally winning. Luna: And this is one of those rare cases where the data and the headlines actually line up. I saw a piece from the Hechinger Report saying that public four-year tuition after inflation fell by about 4 percent over the last two years. Lucas: Yeah, and that's the key part—public universities are driving this. Private nonprofit tuition is still sticky, but public schools have gotten more price-competitive. And it's not because states suddenly got generous with funding. Luna: It's enrollment, right? Lucas: Partly. After the pandemic, undergraduate enrollment at public four-year schools dropped—like, actual number of students fell. Schools have to compete for a smaller pool. So they can't just raise tuition 6 percent a year and expect people to show up. Some states, like California and New York, have also started free community college programs or expanded aid, which puts downward pressure on tuition at the lower end. Luna: So the old story—'college costs are out of control'—might actually be getting rewritten. But walk me through the numbers. How big is the gap now between wage growth and tuition growth? Lucas: Sure. So, hourly earnings are up 3.7 percent year-over-year. Tuition is up 2.1 percent. That's a 1.6 percentage point gap in favor of wages. Now, that's not huge, but consider the compounded effect. If that holds for a few years, the real cost of college—meaning tuition relative to what you earn—starts to shrink. Luna: And this is before any financial aid or scholarships. So for a family that's paying list price, it's still a burden—but it's not getting heavier every year like it used to. Lucas: Exactly. And the broader context is that the Fed's preferred inflation gauge, core PCE, just came in at 3.4 percent in May—actually higher than expected. So services are still hot, but tuition is one of those categories that's behaving. It's a bright spot. Luna: And it's a good reminder that the inflation story isn't uniform. Some things—like tuition, like apparel, like we covered before—are actually becoming more affordable in real terms. Lucas: You know, it's funny—we spend so much time on this show talking about the things that are still squeezing people. Auto insurance, rent, healthcare. But it's worth pausing on a win when we see one. Luna: Totally. And speaking of that, it's also worth noting that this show exists because we want to help people understand these shifts without any ads or sponsors nudging the conversation. If walking through the economy with us has made something click, you can support that at buy me a coffee dot com slash fexingo. It's a simple way to keep the show ad-free. Lucas: Yeah, and we mean that—no ads, no sponsors, just the data and the conversation. Every little bit helps. So, back to tuition: one of the interesting wrinkles is that the tuition slowdown is happening even as demand for college remains strong. Graduation rates are up, and the wage premium for a degree is still there. Luna: So it's not like college is suddenly a bad deal. It's just that the price is becoming more rational. What about two-year schools? Community college? Lucas: That's actually where the story gets even better. Community college tuition has been flat or declining in real terms for several years. Some states have made it free. So for students who start at a two-year and then transfer, the total cost can be very manageable. The CPI data shows two-year public tuition was up only 1.5 percent year-over-year. Luna: And that's a huge deal for access. If the cost of the first two years is essentially frozen, that's a real shift from the 'college is unaffordable' narrative. Lucas: Yeah. Now, I want to be careful not to overstate this. Tuition is still expensive in absolute terms. The average in-state tuition and fees at a public four-year is around $11,000 per year. Room and board is another $12,000. So total cost is still north of $20,000. But the trajectory matters. If it had kept rising 5-6 percent per year, that number would be $25,000 by now. Luna: Right, so we're talking about a few thousand dollars in savings per student per year compared to the old trend. That's real money. Lucas: And it compounds. A family with two kids could be looking at $15,000 to $20,000 less in total college costs over four years compared to what they would have faced in the pre-2020 trend. Luna: That's significant. And it's not just about families paying out of pocket—it also affects how much students need to borrow. Lower tuition growth means smaller loans, which means less debt burden after graduation. Lucas: Exactly. And we're already seeing it. The total amount of federal student loans disbursed has been declining since 2022. Part of that is policy changes, but part is just that the sticker price isn't climbing as fast. Luna: So, let's look forward. Do you think this trend continues? Or is this just a temporary blip? Lucas: I think there are reasons to be cautiously optimistic. Demographics are not on the side of colleges—the number of 18-year-olds is expected to peak around 2026 and then decline. So the competition for students will only intensify. That gives colleges less pricing power. Luna: So it's a buyer's market for higher education, at least for now. Lucas: Yeah, and that's a good thing for consumers. The caveat is that if the economy weakens and state budgets get squeezed, we could see tuition hikes come back as schools try to make up for lost funding. But for the moment, the balance has shifted. Luna: And that's the kind of shift that, if it holds, could really change the college affordability conversation for a generation. Lucas: Absolutely. And it's a good reminder that even in a period where many things feel expensive, some of the biggest-ticket items are becoming more within reach.