Trends in Median Family Income: 1998-2019
Colleges and universities set tuition price based in part upon assumptions regarding trends in family income. Current family income is the primary driver of the calculation of student financial need, which in turn drives financial aid strategy, an integral part of the pricing equation. While each institution has its particular distribution of students by socio-economic profile, overall trends in family income provide an essential baseline for considering the viability and sustainability of pricing and aid strategies and projections. Two primary data sources provide a different profile of median family income nationally for the past 20 years.
Inflation Adjusted Before-tax Median Family Income by Age of Household Head: 1998-2019
This analysis presents the inflation-adjusted median family income nationally from 1998-2019 for each of three age bands based upon age of the head of household. The top chart shows that metric as reported by the U.S. Census Bureau’s Current Population Survey; the bottom chart shows data reported by the Federal Reserve Board’s Survey of Consumer Finances (SCF). Both show the sharp decline in family income that occurred between 2007 and 2012. Both show the appreciable increase in median family income from 2013 to 2019. But the overall income level reported is notably different, with the Census Bureau median income for age 45-54 in 2019 at nearly $110,000 (the highest since 1998 compared to the Federal Reserve’s estimate at less than $80,000, a level equal to that reported for 1998. Most notable are differences in the pattern and levels of income for age band 35-44.
For most colleges and universities, tuition pricing strategy is informed and guided in part by assumptions of affordability in light of family income. While trends and levels of family income for a given school’s aid applicants are drawn directly from the aid application, long-range projections and strategic plans should ground those institutional data in national and regional socio-economic profiles of the market at large. Choosing the basis for that kind of comparative analysis—as shown here—can produce very different conclusions.