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Student budgets were already tight. Inflation is only making it worse.

| Tuesday, November 16, 2021

This semester could be one of the most expensive yet. From toilet paper to coffee, costs of student staples are rising.

The consumer price index, which measures changes in how much Americans pay for certain goods and services, rose 0.4% in Sept., the Bureau of Labor Statistics reported. Over the past 12 months, prices in all categories rose 5.4%, the largest jump in prices in 30 years.­­­

Caitlin Gormley | The Observer
Nationwide, inflation is at its highest since 2008. Notre Dame economics professors say Covid-19 is one contributing factor.

For students, higher prices mean a variety of things. One consequence is an increase in driving expenses, especially for those living off campus. Gas prices are up 1.2% from the month before and 42% compared to year ago. AAA reports the average gas price in the South Bend area stands at $3.33 per gallon, that’s nearly $1.38 higher than this time last year.

“Gas is my biggest expense. Especially with the cold weather approaching, I am spending more money on gas than I used to,” Julia Caccavo, a senior living at Legacy Village, said.

Inflation has taken a toll on everyday household products too. Major producers of household goods, such as Proctor & Gamble and Kimberly Clark, have announced their plans to raise prices moving forward. Students like Caccavo are feeling the effects of these price increases.

“I never realized how expensive toilet paper was before moving off campus,” she said. “The little costs that I never really considered are starting to add up.”

Groceries, which saw a 4.6% price increase over the past 12 months, have also put pressure on students’ pockets. As food prices continue to climb, students have had to budget more and search for bargains at the grocery store.

Timmy Gallagher, a senior living off campus, shared how no longer having a meal plan has made him more aware of his spending.

“Me and my housemates make an effort to cook food at home,” Gallagher said. “With groceries being a huge expense recently, we do our best to limit grocery trips and only get what we need to build cheap and tasty meals.”

Off-campus students are not the only ones feeling the effects of inflation. Students living on campus have also responded to the price jumps and reevaluated their spending habits.

“A Starbucks pumpkin latte used to be my go-to treat to fuel my studying”, Shannon Lyden, a sophomore living in Breen-Phillips Hall said. “But it has gotten too expensive. Now, I make my own coffee in my dorm room.”

If a cup of joe wasn’t expensive enough, coffee saw a 4% increase from last September to this year.

Beyond student impact, inflation has taken its toll on Notre Dame administration too. Rachel Hughes-Gehrig, project and accounting coordinator for Notre Dame Marketing Communications, said rising prices have made it difficult to keep offices stocked.

“We’re having a hard time finding what people are used to. Everyone’s favorite snacks are not only more expensive, but they take twice as long to get here,” Hughes Gehrig said.

What Hughes Gehrig is referencing is the recent disruption in the supply chain. Bottlenecks in global supply chains have caused record shortages in a range of goods, including food and beverages, cars, and even ingredients for Thanksgiving dinner. The supply chain issues contribute to rising prices.

However, there is no single culprit. Eva Dziadula, an associate teaching professor in the Department of Economics at Notre Dame, gave some insights on what might be causing these high inflation rates.

“The pandemic is obviously having an impact”, she said. “We saw sort of a big decline in demand when COVID started and now as people are getting vaccinated and can do more things, demand for almost everything increases, and as a result, prices go up.”

She also pointed to larger issues in the global economy as a cause for the higher prices.

“Part of it is the largest producing markets for food have had horrible harvests,” Dziadula said. “When crops physically cannot grow, there is a huge shock on the supply side and things become more expensive.”

Dziadula thinks that these problems will likely persist for a while, especially given the unexpected impact of the Covid-19 pandemic.

“We’ve never had anything like this before,” she said. “And I don’t think it is just gonna go away anytime soon with a magic wand.”

However, there is some hope. Dziadula mentioned there are some things policymakers could do to ease inflation. She talked about a potential contractionary monetary policy which would work by increasing interest rates to reduce demand and slow economic growth. This could come at a cost, though.

“Less growth could make unemployment worse, a problem that has already been really prevalent throughout the pandemic”, she said.

Another option is action from the Federal Reserve, the central banking system of the U.S.

Max Goedl, a visiting assistant professor in Notre Dame’s Department of Economics, shed some light on the Federal Reserve’s role in easing the effects of inflation.

“[The Fed] has been buying a lot more bonds than usual and pumping money into the economy,” Goedl said. “Recently, though, they announced they are going to stop doing this sooner than they originally planned.”

The Fed’s decision to start tapering bond purchases is designed to decrease the money supply, Goedl said. This move aims to decrease spending and hopefully, prices along with it, thereby slowing inflation.

Both professors say there is no one solution. Inflation is hard to predict because it is tied to a lot of variables and has a whole range of effects.

“It is not as simple as everything is getting more expensive,” Goedl said. “There are winners and losers from inflation.”

In one sense, students can be on the winning side.

“The higher rates of inflation actually lower the real burden of debt, which I would guess would actually help a lot of Notre Dame students that have a lot of debt,” Goedl said.

What this means is that students who have borrowed money for their education, may have the chance to pay back the loan with dollars that are worth a lot less than the ones they were originally lent.

For students borrowing money to pay college tuition, inflation might have a silver lining, one that comes at the cost of more expensive Starbucks drinks.

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