What Does it Cost a University to Educate One Student

Abstract

A dilemma that may confront administrators is whether it makes economic sense to continue offering a program that is unable to draw in a sufficient number of students to recover its cost. But what is cost? Often, a university may determine a standard cost per credit or unit and use this figure as basis for computing total cost. This is then compared to a revenue stream and the difference, whether positive or negative, is imputed to the decision analysis process. This method of computing costs, while appealing for its simplicity, may fail to capture the effects of economies that may arise as one school or college services another. The inaccuracy in the cost computation may lead one to favor or disfavor a program that may have repercussions to the total university cost structure. Drawing from this need to determine a more accurate means of computing costs, as basis for decision-making, the authors used basic cost accounting methodology applied to the academic environment and were able to compute for a cost per degree per student for each university studied. While the methodology is more time consuming, the computed figures are deemed closer to actual costs and thus is more valuable to that critical decision of whether a program is worth pursuing or not.