College Costs

In a recent comment, Jules wrote "I once heard that a semester of college in 1920 cost the same number of gold oz as it would in 1990. Any truth to that?"

I've been wondering about that for some time now. My kids are young enough that I still have about 10 years before they will be looking at colleges, but it raises an interesting question: how much gold do I need to save now to cover their college costs in ten years?

After looking around for tuition numbers, I decided to focus on Yale University. They publish A Yale Book of Numbers and an update that contain all sorts of interesting data about Yale (including tuition costs) from 1701 to 1999. More recent data is available in news reports, press releases, and from Sallie Mae. I've compiled some of this data into the chart of Yale College Tuition, and I will update it annually going forward.

Although dollar costs for tuition, room, and board have risen tremendously, from about $700 per year in 1900 to $48,622 per year in 2009, their price in gold has only risen from 1,053 gold grams in 1900 to 1,726 gold grams in 2009. It's been a wild ride, though!

Before we continue, re-read that last paragraph carefully… in dollars, prices have risen to 70 times their starting price! SEVENTY TIMES! In gold, they are up 64% over a 109 year period. Interestingly, Yale tuition was almost exactly the same in the 2008-2009 school year (1,633 grams) as it was in the 1932-1933 school year (1,589 grams). It works out that 2008's annual tuition is just $30 more in the gold coins of 1932. In fact you'd get a couple of silver quarters and a silver dime back in change from your $10 eagle and $20 double eagle. This is in spite of a 44x increase in dollar prices, from $1,056 in 1932 to $46,000 in 2008.

Prices were quite stable until World War I, when they began to rise, peaking in the early 1930s at around 1,600 grams – not far from today's price! Although tuition prices in dollars were stable or rising very slowly, the collapse of the dollar in 1934, from about 1.5 grams to .88 grams, lowered tuitions as measured in gold dramatically.

They stayed low until after World War II, when they began to rise strongly, from about 1,000 grams to a peak of 3,441 grams in 1970. When Nixon gave up the defense of the dollar and closed the gold window, the dollar again collapsed, and although tuitions doubled in dollar terms, they fell in gold terms to a low of about 450 grams in 1980. As the dollar doubled in value from 1980 to 1999, and tuitions continued to rise in dollar terms as well, tuitions priced in gold rocketed to a new all-time high of 3,929 grams in 1999.

Since then, despite rising about 50% in dollar terms, the plunging value of the dollar has cut the cost of tuition to less than half of its old high.

As for the future? I don't own a crystal ball, so I can't be very specific… Still, it looks to me as though the current economic troubles could pull tuitions (priced in gold) lower from here. Technically, there seems to be good support at about 1,000 grams, and 500 would be a real bargain. It may take a few years to reach those levels, though. And 5 years after that, when I'm looking at college expenses for my kids? I suspect that the same 1.5 kg of gold that would cover most of a year today will still do the job then, even if the US Government is printing $1,000,000 bills and it takes a wad of them to buy a Big Mac.