Uncovering Hidden Economic Opportunities: Cost per SCH

October 15, 2024

Is your institution operating as efficiently as it could be?

Inconsistent efficiency across departments isn’t just frustrating—it’s costly. Identifying areas ripe for improvement often feels like finding a needle in a haystack.

Knowing your cost per student credit hour (SCH) is the first step in identifying hidden economic opportunities. Calculating costs by SCH normalizes instructional costs so you can compare costs across courses, subjects, programs, and departments.  Once you know this, you can use four quick steps to uncover hidden cost-saving potential and improve resource allocation.

Contemporary University: A fictional university with 20 departments and an enrollment of more than 13,000 students. We will focus on Contemporary University’s Business Department.

We are going to use the four steps outlined below with our fictional university, but you can easily use them at your institution:

  1. Compare your cost per student credit hour (SCH) to peer institutions
  2. Identify subject areas where your cost per SCH exceeds a target threshold
  3. Understand what is driving your cost higher than your peers
  4. Explore course scheduling options to reduce cost per SCH

To do the analysis, we will use Gray DI’s PES Economics and Outcomes software to reveal insights and find efficiency opportunities.

   1. Compare your cost per student credit hour (SCH) to peer institutions

Let’s take a look at a benchmarking example. In the chart below, Contemporary U’s cost per SCH is represented by the black bar. Do you notice anything interesting?

Contemporary U Business Courses by Level - Cost per Student Credit Hour vs Sample

This bar chart displays Contemporary University’s cost per student credit hour by course subject and level group:

  • UG Lower: undergraduate lower-level
  • UG Upper: undergraduate upper-level
  • GR: graduate

   2. Identify subject areas where your cost per SCH exceeds a target threshold

The disparity in graduate Marketing course costs should raise some eyebrows. While the 75th percentile (top quartile) of institutions cost $293 per student credit hour, Contemporary U costs a staggering $1,516 per SCH to deliver the same course material. This begs the question: What’s driving this five times cost difference?

   3. Understand what is driving your cost higher than your peers

Contemporary U’s full-time share of instructional cost is similar to peers, so that isn’t the issue:

Since peer institutions have a similar cost structure, this is not the driving factor behind Contemporary U’s higher cost per SCH, even when full-time faculty are higher-cost instructors than adjuncts. So, if the cost isn’t the issue, what is?

It’s the SCH! The average SCH per course in Marketing is 13 compared to 93 for peers:

Assuming a three-credit hour course, this means Contemporary U averages four students per graduate Marketing course while peer institutions average 31 students. That’s a big difference! In this case, the fastest way to reduce the cost per SCH is to increase the number of student credit hours produced. The more student credit hours per section, the lower the cost per SCH, and more SCH means you need more students. The next question should be: Is there market opportunity to attract more students to graduate Marketing at Contemporary U?

 4. Explore course scheduling options to reduce cost per SCH

While the small number of students per course is the main driver of Contemporary U’s high cost per SCH, there is also an opportunity to consolidate sections. The section of Foundations in Strategy was offered to six students, while both Marketing 520 and Marketing 590 ran two sections with five and one enrollments. These sections could have been taught as one, and the instructors would have capacity to teach in the large undergraduate Marketing program.

Splitting students into more sections than needed is expensive and an inefficient use of your faculty resources. This is just one example of how benchmarking can help you identify inefficiencies and make small changes with a big impact.


Learn to optimize resource allocation, develop data-informed revenue strategies, and position your institution for long-term sustainability. Click here to discover insights from our benchmarking for sustainability video resource that can transform your institution’s resource management.

Elizabeth Atkins

Vice President, Product

About Gray DI

Gray DI provides data, software and facilitated processes that power higher-education decisions. Our data and AI insights inform program choices, optimize finances, and fuel growth in a challenging market – one data-informed decision at a time.

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