Fiona M. Hollands 

Henry M. Levin 

Center for Benefit-Cost 

Studies of Education, 

Teachers College, The critical importance of costs for education Columbia University decisions 

This brief is intended to help decision makers in schools, districts, state 

education departments, and intermediary organizations think about ways that 

cost analyses can help inform their decisions about program choices, budgets, 

and strategies. 

Why cost information matters in education 

Decision makers 

must often choose 

among a variety of 

programs or 

strategies when 

considering how to 

improve student 

results 

A growing body of high-quality 

research can help inform whether 

and how specific reforms and 

programs improve students’ 

academic outcomes. But without 

accurate measures of the costs of 

producing those outcomes, the 

picture is incomplete. Even the best 

programs and policies fail when 

budgets are inadequate or when 

implementation is not rigorous. 

Within given budget constraints, 

educators must consider how to 

optimize existing or future resources 

to ensure the best possible learning 

outcomes for students. 

Decision makers must often choose 

among a variety of programs or 

strategies when considering how to 

improve student results. 

For example, a school leader seeking to 

help struggling elementary school 

readers improve their reading fluency 

may need to choose between two early 

literacy programs: Literacy Groups, a 

pull-out program that serves students in 

groups of four, and Literacy 

Afterschool, an afterschool program 

that serves students in pairs.1 Both 

programs require teachers to work with 

small groups of students, but the 

programs may differ in: 

•	 Length. 

•	 Frequency of intervention. 

•	 Duration of each session. 

•	 Number of students served over the 

year. 

•	 Materials, equipment, and facilities 

needed. 

•	 Amount of teacher training 

required. 

Each of these differences will affect the 

costs of implementation. 

1 These program names are fictitious. June 2017 

REL 2017–274 

1 
 

 

Weighing options 

Sometimes, the available options vary substantially. For example, educators have used computer-assisted 

instruction, peer tutoring, longer school days, and class size reduction to improve elementary reading and 

math. Each strategy makes different demands on personnel, facilities, and scheduling; therefore, each one 

could result in different costs to gain the same level of student improvement. 

Cost analysis can 

help in planning 

and adopting a new 

program or in 

improving an 

existing program. 

If these different demands and costs are not fully anticipated, the chosen education 

strategy may be not be implemented properly because of inadequate resources. 

These problems, in turn, will reduce the chances of achieving the desired results for 

students. Awareness of resources needed for proper implementation can help 

ensure program success. It also makes it more likely that, when two options are 

expected to produce the same student gains, education decision makers will have 

the information needed to choose the program that is least costly to implement. 

Cost metrics to inform decision making 

To measure costs, all of the resources or “ingredients” required for successful implementation of a program 

or strategy must be identified and a dollar value determined for each one. The costs identified should be 

based on real-life implementation of the program rather than on generic or idealized program descriptions. 

Useful metrics include: 

•	 Total program costs for all participants served. 

•	 Average program costs per student or teacher served. 

•	 The range of costs per participant—that is, the low and high costs if some participants require more 

resources from the program than others. 

•	 The marginal costs of adding each additional participant to an established program. 

Separating costs into categories, such as personnel, facilities, materials, and equipment, reveals the different 

ongoing resource needs of a program, which may affect its sustainability. 

For planning purposes—particularly when considering the optimal scale of a program—it is important to 

understand which costs are fixed and which costs vary with the number of participants. For example, a 

program supervisor’s time for Literacy Afterschool, one of the two early literacy programs introduced on 

page 1, may be a fixed cost if there is only one supervisor, regardless of the number of students served, but 

costs of materials and teacher time are likely to vary depending on how many students participate in the 

program. 

Additionally, site-level cost information can highlight operational differences at each program location so 

that administrators can identify opportunities to improve program efficiency. Continuing with the Literacy 

Afterschool program example, at one school the students may be taught by a teacher, while in another 

school the students are taught by parent volunteers. At the second school, costs per participant may be 

lower, but the absence of a professional teacher may also affect the extent to which the program helps the 

students improve their reading fluency. 

Finally, it is also useful to determine what portion of the total program costs each stakeholder group is 

responsible for—that is, who pays the costs. A school may be responsible for some of the costs of 

implementing a new program, while other costs may be borne by the district, a local community partner, or 

even volunteers. For example, having parent volunteers consistently available to help with an afterschool 

program would reduce the school’s costs for staff time. Or if a local company commits to providing new 

2 
laptops to students every three years, a school can substantially reduce its technology acquisition costs for a 

one-to-one laptop initiative, although it would still be important to anticipate ongoing costs of laptop 

maintenance and instructional technology support. 

How cost analyses can inform decision making 

Cost analyses can be helpful for a variety of decision making purposes, either in planning and adopting a 

new program or in improving the operation of an existing program. Decision makers can use cost analyses 

to inform decisions in the following ways: 

•	 To determine the resources needed and the associated costs to implement a new 

program. The most basic use of cost analysis in education is to assess the resources required to 

implement a new program and to determine what these resources will cost. Before adopting a new 

program and with this information in hand, decision makers should ask this critical question: does the 

school or district have sufficient resources available to guarantee that the program will be implemented 

as envisioned? If not, can the missing resources be procured? 

•	 To make smart decisions about existing programs. Cost analysis can inform decisions about 

existing programs. It can facilitate the monitoring of and accountability for ongoing programs by 

determining whether resources are being used as planned and are being distributed equitably. It can 

also show whether a program is sustainable and reveal how deviations in implementation may affect 

both costs and effectiveness. 

•	 To identify which sites are doing the best job in implementing a program. Costs can be 

compared across program sites to spotlight efficiencies and best practices in resource use and to identify 

sites that are lacking adequate resources. Decision makers can subsequently make informed adjustments 

to program activities and resource allocation among sites. 

•	 To decide whether to scale up or cut back on a program. By documenting the financial, 

personnel, and other resources needed to serve program participants and assessing the feasibility of 

allocating more resources to the program, decision makers can determine the number of additional 

students that can be served by an existing program and estimate the optimal enrollment. If budget cuts 

are necessary, information on costs per participant and cost per service component can be used to 

determine whether to target only the neediest participants or to adjust the amount of each service to 

ensure that at least a minimal level of services is provided for all potential participants. 

Example of using cost analysis for a decision about whether to scale up implementation of a program 

A large school district in the eastern United States is assessing the effectiveness of a digital program for improving 

elementary school literacy. District office evaluators are conducting an experiment in which some students are assigned 

to the program and a set of comparable students are not. Reading performance of students in the two groups is being 

compared. The district will use the results of the effectiveness study to decide whether to scale up the program across 

the entire district. Estimating the costs of program implementation before attempting to scale up will allow the district to 

determine whether the necessary personnel, equipment, and other resources will be available districtwide to support 

implementation at scale. The district can then balance the expected gains in literacy against the burden on resources. If 

the program results in significant improvements in literacy, the district may be willing to expend substantial resources on 

districtwide implementation. However, if the program only marginally improves literacy but places a heavy demand on 

resources, the district may decide against scaling up. On the other hand, if the program does not result in any change in 

literacy performance but places fewer demands on resources, it may still be worth considering for widescale adoption. 

3 
Resources to help calculate costs of education programs 

Analyzing the costs of implementing education programs can be a demanding 

undertaking. A free, online tool, CostOut, funded by the Institute of Education 

Sciences at the U.S. Department of Education, can help district personnel 

estimate and compare the costs of implementing different education programs. 

Once district personnel have entered a list of all personnel, facilities, materials, 

equipment, and other resources required to implement the program and have 

indicated how many participants will be served, CostOut can help: 

•	 Estimate total program costs and costs per participant. 

•	 Assess how costs change as the number of program participants varies. 

•	 Assess how costs change as different resources are substituted for existing ones. 

•	 Spread the burden of costs across a number of stakeholders, such as the school, district, and parents, to 

make it clear who will pay for which aspect of implementation. 

CostOut includes a database of national average prices of education resources, such as teacher and principal 

salaries and benefits rates and education facilities, materials, and equipment. Users can add their own local 

prices as well. CostOut can be used to help conduct various types of cost analyses, as discussed in the next 

section. 

Types and uses of cost analysis 

When only the costs of a program are being considered for a decision, the type of analysis may be called a 

cost-feasibility analysis. Decision makers can use this type of analysis to assess whether, given available 

budget and resources, it is feasible to implement a new program or whether an existing program can be 

scaled up to serve more participants. For an early literacy program like Literacy Groups, described on 

page 1, cost considerations would include whether new teachers must be hired or whether existing teachers 

can be trained to deliver the program, how many hours of teacher and other personnel time are needed to 

implement the program, what additional materials or equipment must be purchased, and what physical 

space is needed to serve students. Depending on the availability of resources, the district could determine 

how many students can be served by the program and establish a cut-off for eligibility—for example, all first 

graders scoring below the 25th percentile on a literacy assessment. 

Decision makers can compare information on program costs to program results to conduct a costeffectiveness analysis to inform a choice among several programs, a cost-benefit analysis to assess whether 

a program is providing a good return on investment, or a cost-utility analysis that assesses the value of 

alternative programs based on a number of objective and subjective dimensions, which may include 

evidence of effectiveness at improving student outcomes as well as some measure of parent support. A 

combination of cost data with information about the results of a program underlies several types of cost 

analysis: 

•	 Cost-effectiveness analysis. When more than one program is available to help improve a specific 

student outcome, it is useful to compare the costs of each program with its impact on that outcome. For 

example, if the goal is to improve first grade reading fluency, decision makers can compare the costs of 

implementing Literacy Groups and Literacy Afterschool with the expected increase in performance on a 

fluency assessment associated with each program. Literacy Groups, the pull-out program that serves 

students in groups of four, may cost $6,000 per student and result in a 5-point greater gain in fluency 

scores compared with similar students not being served by the program. Literacy Afterschool, the 

4 
 

 

afterschool program that serves students in pairs, may cost $8,000 per student and confer a 10-point 

greater gain in fluency scores. While Literacy Afterschool is more costly overall, the cost per extra point 

gained in fluency scores is $800 ($8,000/10 points), while for Literacy Groups it is higher, at $1,200 

($6,000/5 points). If the district can afford and implement either program with fidelity, decision makers 

can use this analysis to decide whether the additional 5-point gain produced by Literacy Afterschool is 

worth the extra $2,000 per student. 

•	 Cost-benefit analysis. The term “cost-benefit analysis” is often used informally to describe 

professional judgments about whether investing time and money in a program or strategy is worthwhile. 

However, formal economic analysis can be used to assign monetary values to program results so that the 

dollar value of the results can be compared directly to the dollar amount of costs. For example, if 

Literacy Afterschool, described above, helps a student avoid special education services costing $10,000 

per year in second grade and beyond, the $8,000 investment in first grade is more than justifiable on 

financial grounds. 

•	 Cost-utility analysis. Education leaders must often consider multiple factors and stakeholder groups 

when choosing among programs: in addition to assessing costs and gains in student performance, they 

may consider, for example, teacher buy-in, parent preferences, and compatibility with the existing 

curriculum. In a cost-utility analysis each of these dimensions of program value is measured and 

contributes to an overall assessment of each program. For example, if Literacy Groups, described above, 

is strongly preferred by parents and teachers because it is delivered during school time rather than after 

school, this preference could tip the balance against Literacy Afterschool, especially if a 5-point gain in 

fluency scores is considered sufficient by all parties. Cost-utility analysis provides a framework to 

balance the costs of a program with its overall perceived value to program stakeholders. 

Different methods of cost analysis can answer cost-related questions from different angles. Each method has 

distinct advantages and disadvantages. The table on page 7 summarizes the advantages, disadvantages, and 

possible applications of each type of cost analysis. 

 

5 
 

Summary 

As pressure builds for evidence-based decision making in schools, cost analyses conducted in conjunction 

with assessments of program results provide valuable information to guide choices among education 

programs and strategies. Such analyses provide justification for resource use and information for optimal 

resource allocation and equitable distribution of resources. Decision makers can use cost analysis to: 

•	 Assess the resources required and costs of implementing a new program. 

•	 Inform monitoring, accountability, and resource use of ongoing programs. 

•	 Determine whether resources are being distributed equitably across sites and participants. 

•	 Inform decisions regarding scale of program implementation and level of services provided. 

•	 Compare several programs to help select the most effective one for students, relative to its cost. 

•	 Balance the costs of an education program against the expected results to determine whether it 

represents a wise investment of resources. 

•	 Compare several programs to weigh costs against how well each program meets stakeholder needs. 

In sum, education decision makers can make more informed decisions by considering the results of 

interventions, strategies, and practices in light of implementation costs. Resources such as CostOut are 

increasingly becoming available to facilitate cost analysis. 

6 
Summary of the purposes and possible applications of four types of cost analysis 

Type of cost analysis Purpose Advantages Disadvantages PossCost-feasibility To assess whether adequate • Can be used to swiftly rule out • Considers only costs, not To d

resources are available to program choices that cannot effectiveness, benefits, or utility can implement a new programa as feasibly be implemented in the stud

intended or scale up an existing decision maker’s context nece

one 

Cost-effectiveness To assess which of several • Can be used to decide among • Can evaluate several programs To d

programs produces the desired alternative program choices but only one education outcome progeducation outcomes for the lowest • Includes consideration of (such as reading rela

cost or maximizes education program effectiveness as well comprehension) at a time read

outcomes for a given amount of as costs or use of resourcesinvestment

Cost-benefit To determine whether the 

economic benefits of a program exceed the costs 

• Can compare the resource 

requirements and benefits of two or more programs with similar or different objectives 

• Requires estimating benefits as 

dollar values 

To abenprevinve

Cost-utility To compare the costs of a program 

with its usefulness to program stakeholders 

• Allows consideration of multiple 

factors beyond effectiveness and costs 

• Allows multiple stakeholders to 

participate in the decision about which program to implement 

• Can be used when little 

objective evidence of effectiveness exists as yet 

• Can be used when programs 

address more than one 

• Produces results that are 

relevant only to the context in which the analysis is conducted 

To instakparecooevidcostdemdecspec

educational outcome—for example, both reading and math 

a. In this table “strategy,” “intervention,” or “policy” can be substituted for “program.” Source: Adapted from table 1.5 in Levin, H. M., & McEwan, P. J. (2001). Cost-effectiveness analysis: methods and applications (2nd 

Publications. 

7 

This report is in the public domain. While permission to reprint this publication is not necessary, it should be cited as: Hollands, F. M., & Levin, H. M. (2017). The critical importance of costs for education decisions (REL 2017–274). Washington, DC: U.S. DeInstitute of Education Sciences, National Center for Education Evaluation and Regional Assistance, Analytic Technical Assistance and Devhttp://ies.ed.gov/ncee/edlabs.