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With the costs of college rising, policymakers and institutional leaders have struggled to cut spending while improving student-success rates. In "Linking Costs and Postsecondary Degrees: Key Issues for Policymakers" (published by AEI's Future of American Education Project), Nate Johnson offers practical advice for decision-makers struggling to rein in college costs while improving productivity. Johnson, who previously served as executive director for planning and analysis for the State University System of Florida, currently works as a higher education policy consultant with a particular expertise in effective cost management.

"There is not a magic formula to arrive at a cost of education that will serve every possible need." -- Nate Johnson

Johnson provides a step-by-step guide to different approaches for calculating costs. He highlights the tremendous variability in cost across programs within institutions, and documents some of the "hidden costs" of higher education. Rather than cut budgets across the board, as many cash-strapped schools have done, officials should make budget decisions based on clear and reliable data that prioritize performance and productivity, Johnson argues.

Johnson offers five simple "rules of the road":

1. Acknowledge that different degrees do not all cost the same. Decision-makers should keep the variability in program and degree cost in mind as they seek to reduce spending and balance budgets.
2. Private-sector colleges and universities show where growth in enrollments is possible even without massive state subsidies. Policymakers would be wise to examine what private colleges are doing and how much it costs them to do it.
3. Larger institutions are less costly because they benefit from economies of scale. Smaller institutions may be able to share facilities or merge entirely.
4. Policymakers must distinguish between enrollments and degrees. Low-cost, high-enrollment programs with low rates of student success can be a false bargain.
5. Past program performance may not be the best indicator of future success. Institutions with high costs per degree may have the most room for productivity gains.

"There is not a magic formula to arrive at a cost of education that will serve every possible need," Johnson cautions. "Yet with a few key concepts in mind, and access to accurate and timely information, it is possible for policymakers to make good use of cost data in setting goals, allocating resources, and asking tough questions of higher education leaders."

Nate Johnson is an independent higher education consultant based in Tallahassee, Florida and an affiliated consultant with HCM Strategists, LLC.