Why Understanding the Cost of Teaching Matters More Than Ever
Australian universities operate in an environment of constrained public funding, growing demand for diverse delivery modes, and pressure to maintain educational quality. Understanding the cost of teaching is crucial for academic leaders navigating these pressures to ensure sustainable and mission-aligned resource allocation.
Collaborative research by Pilbara Group and the University of Melbourne Centre for the Study of Higher Education sheds new light on the true cost drivers of teaching at the subject level across Australian institutions. As Professor Emeritus William F. Massy highlights, the focus must shift from aggregate spending to strategic insights on where and how money is spent:
“The key question is not simply how much we spend on teaching, but how well those expenditures align with educational priorities and outcomes.”
Moving Beyond Discipline-Based Funding Models
Traditional funding models in Australia predominantly differentiate by field of education (FoE), but recent findings suggest this approach oversimplifies the complexities of teaching costs. The research analysed cost data from 11 universities, revealing that factors like subject size, delivery mode, and campus location have significant influence on cost per student.
Key insights include:
- Subject size explains about 60% of cost variation, highlighting economies of scale challenges in small classes.
- Postgraduate subjects tend to be more expensive than undergraduate and sub-bachelor subjects.
- Online delivery costs are typically 15–30% lower than on-campus, while mixed-mode delivery costs are comparable to on-campus.
- Regional campuses show higher costs, reflecting smaller enrolments and duplication of offerings.
These nuances question the effectiveness of current discipline-focused funding and call for more granular, data-driven approaches.
A Strategic, Data-Informed Approach to Teaching Cost Management
For university leaders, understanding these cost drivers is not merely an academic exercise, it informs key strategic decisions:
- How can institutions optimise subject sizes or delivery modes to improve cost efficiency without compromising quality?
- Where should resources be allocated to support high-cost but mission-critical programs?
- How do regional campuses balance community access with cost challenges?
Institutions that integrate detailed costing data into planning can better align teaching investments with strategic priorities and funding realities.
Applying Cost Insights at the Portfolio Level
Isolated subject-level cost analysis risks missing the bigger picture. Universities increasingly adopt portfolio management approaches that consider programs in terms of their academic value, strategic role, and financial impact. This includes recognising service subjects that underpin multiple degrees despite higher per-student costs.
Examples of tools and approaches include:
- Cost and enrolment heatmaps across subjects and campuses
- Crosswalks linking teaching FTEs with cost centres
- Analysis of teaching delivery modes and their financial implications
These tools enable institutions to evaluate where to invest, protect, grow, or reconsider teaching offerings based on both cost and mission alignment.
Conclusion: Cost of Teaching as a Pillar of Strategic Academic Resource Management
As financial pressures persist, the cost of teaching must be understood and managed as a core component of academic resource strategy. This means moving beyond broad funding categories to data-informed decisions that recognise the true drivers of teaching costs.
Australian universities positioned to leverage such insights will be better equipped to:
- Advocate for smarter funding models reflecting real cost drivers
- Optimise delivery models and campus investments
- Ensure every dollar spent supports quality education aligned with institutional mission
Share this article with colleagues in academic leadership, finance, and planning to foster strategic conversations on cost management in teaching.
Listen to the Pilbara Insights Podcast – S01E06 – Cost of Teaching