The cost of teaching a student from a low SES background is significantly higher than for more advantaged students. The reasons for these costs include the ‘obvious’ assumptions, such as bursaries, but are likely driven more substantially by infrastructure investment by a number of universities specifically supporting campuses in areas and regions as part of their mission to provide a university pathway as an option to a diverse range of our population.

We believe this investment (a better way of thinking about it than ‘cost’) could be better recognised in funding agreements by switching the focus from ‘activity-based’ funding (i.e. “count your widgets, take your dollars”), to ‘mission-directed’ funding (i.e. recognition of the social impact and additional resources that these contributions require and perhaps redirecting funding from the low cost ‘low hanging fruit’ approaches of some).

Who are we and how did we discover this? A team of researchers spanning multiple universities (Victoria Uni, ANU, Curtin RMIT) and ACER published an article exploring the costs associated with supporting students from low socioeconomic status (SES) backgrounds in university. Our study has a ridiculously complex methodology – using econometric modelling to explore the economies of scale in relation to the costs of educating students in Australian universities, with ten years of financial, enrolment and employment data from 37 universities, and then exploring the outcomes with people who run universities across a range of states – but when you pare it all back, a relatively simple set of findings:

Here’s an overview.

Quantifying costs and differences in costs

First we compiled a large dataset spanning all Australian universities across 10 years. The dataset contained operating expenditure, student enrolments, level of enrolment, field of education and background characteristics of students, teaching costs, research grants, location of university and type of university. This was analysed using an econometric model to identify the average costs for each student, and to explore if there are economies of scale in enrolling some groups of students – in other words, does the average cost decline the more of a group of students you enrol? 

The stark finding (that we checked and re-checked) was that when all other elements are controlled for, the average annual cost for a student from a low SES background at undergraduate level was about 6 times higher than for a student from a medium or high SES background. The difference was slightly lower for postgraduate level students, but nonetheless, it was still a notable difference.

However, the other aspect of the analysis did show that there are economies of scale in enrolling students from low SES backgrounds at undergraduate level – that is, the higher the number of students of this background, the lower the average costs per student become. We also found the opposite (i.e. a diseconomy of scale) for medium and high SES student enrolments.

Explaining the differences

We took our data findings ‘on the road’, visiting four diverse universities in Australia to talk with academic, finance and student support leaders. We wanted to test whether the outcomes from the analysis made sense on the ground and found that while views differed, some key explanations were clear:

• The kind of additional support needed by students from low SES backgrounds includes: outreach support to raise aspiration and relevant individual capital prior to enrolment; academic, personal and financial support while at university; and in some cases, support to care for students with highly complex needs.
• The support factors that contribute to the additional costs include investment in the items listed above plus the costs of establishing, maintaining and appropriately staffing multiple and/or regional campuses, particularly but not only those located in highly disadvantaged communities. Further, it was found that universities that are strongly prioritising or enacting missions to address disadvantage have higher costs than universities with other missions.
• Additional support costs are not the same for all low SES students. Low SES students are not a homogeneous group. Depending on their particular background and circumstances, low SES students may experience different levels of disadvantage and/or multiple disadvantage.

In the universities consulted, there were different costs and different approaches to supporting low SES students. This was partly because of the differences in the universities’ missions, the number and geographic locations of campuses and the characteristics of the particular low SES students for whom support was being provided.

Future considerations on funding

We hope that what this research does is help to highlight the difference in investment required depending on the backgrounds of students enrolled in a university. The emphasis in shifting language from ‘cost’ to ‘investment’ is intended as a means of changing views and perceptions – much the way in which some universities in Australia embed in their mission an aim to open up opportunities by investing in areas or communities where previously a university pathway was not a consideration.

A radical, yet seemingly logical, proposition coming from this research is that if some student groups need a greater investment than others, then perhaps the funding pie should be cut in a way that recognises the variable investments required. From our work, we feel that consideration of ideas to recognise the various missions of universities and the different students they serve in following their mission could be captured in funding allocations. Ideas we have suggested for further consideration include a redistribution of funding based on need; shifting emphasis from activity-based to mission-directed costing; applying the principles of ‘cost compensation’; and conceptualising funding support for students from low SES backgrounds as a transformational investment that can improve outcomes for individuals, communities and society, rather than as a cost.

Dr Daniel Edwards is the Director of the Tertiary Education Research Program at the Australian Council for Educational Research, and an Honorary Senior Fellow with the University of Melbourne’s Melbourne Centre for the Study of Higher Education. Daniel Edwards (ACER) wrote this post on behalf of the project team: Marcia Devlin (VU), Liang-Cheng Zhang (ACER), Glen Withers (ANU), Julie McMillan (ACER) and Lyn Vernon (Edith Cowan University)