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Analysis: Looking at all the costs, small schools make sense

Is bigger really cheaper? Should expense be an obstacle to creating small schools?

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

The following is an excerpt from Dollars & Sense: The Cost Effectiveness of Small Schools, a report by the KnowledgeWorks Foundation.


The idea persists that however beneficial small schools may be, they are prohibitively expensive.

This report finds a contrary result by looking more closely at the supposed economies of large schools. Adding up the costs and weighing them against the benefits shows that small schools not only are better places in which to educate children, but that large schools themselves actually create significant diseconomies.

Researchers at New York University’s Institute for Education and Social Policy examined 128 high schools using school-by-school budget information for 1995-96. They found that schools with fewer than 600 students spent $7,628 per student annually, $1,410 more than was spent by schools with more than 2,000 students.

The cost per graduate, however, at the small schools was $49,553, slightly lower than the per-graduate cost of $49,578 at larger schools.

This is because dropout rates at the small schools were much lower – 64 percent of small-school students graduated in four years compared with 51-56 percent of the students in large schools with 1,200-2,000 or more students.. This finding is particularly encouraging because the small schools served a higher percentage of poor students and part-time special education students than did the large schools.

Using similar methodology to that used in the New York study, researchers reported in 1999 that in Nebraska small schools out-performed larger schools in both the percentage of students graduating and the percentage going on to post-secondary education..

By two important measures of student outcomes, smaller schools in Nebraska generally perform better than larger ones. The additional input cost of supporting students in smaller schools needs to be weighed against their more positive educational outcomes. The so-called inefficiencies of small schools are greatly reduced when calculated on the basis of cost per graduate, and virtually disappear when the substantial social costs of non-graduates and the societal impact of college-educated citizens are considered.

Measuring per graduate instead of per student cut the annual cost differences between the smallest schools and the larger ones in half.

Measuring expenses by the cost of educating a student who graduates makes sense. Once it is mentioned, it seems strange that for years schools have calculated costs by counting students who drop out in the same measure with students who graduate with marketable skills and/or go on to postsecondary education.

The term "economies of scale" was borrowed from the business world, so it seems only fair to use a business-like method of measuring results. No viable business would include the costs of "producing" (educating) a "product" (students) that didn’t meet certain "quality controls" (graduation requirements) to measure its costs and rate of success in the marketplace. Both the Nebraska study and its counterpart in New York show that, measuring by the cost of a graduate, small schools are good financial and educational investments.

While it may be true that in small schools some costs increase because they are spread out over fewer students, research suggests that large schools require added tiers of administration, more security people, and additional maintenance and operations personnel. The reason for this may be that in large schools more students feel alienated from the life of the school and some vent their anger in inappropriate or violent behavior. Therefore, it takes more paid professionals per student to deal with the negative effects of alienation in a large school than in a small one, where people know each other better.

Students drop out of large schools at significantly greater rates than they do out of small schools. The costs to society for students who drop out of high school before graduating are enormous – incalculable in terms of loss of productivity and effects on the individual and members of his or her family. Dropping out of high school influences a person’s health, chances of being on welfare, chances of getting a job, chances of going to prison, and his or her relationships with family members..

Almost half of the people who are heads of households receiving public assistance are dropouts. Dropouts are almost three times more likely to receive assistance than graduates who did not go on to college (17 percent to 6 percent). This is expensive in human and monetary terms.

Dropping out of high school makes it likely that a person will earn one-third less than his or her classmates who graduate, and it is less likely the dropout will find work.. This is a loss of productivity not only to the individual, but to the society as a whole. Success in high school is a necessary step toward earning a college education.

Educational attainment is associated with social and physical health. People who have graduated from college are twice as likely as those without a high school diploma or GED to report being in excellent or very good health, and parents who lack a high school degree are more likely to be involved in incidents of child abuse and neglect.

Perhaps the worst indictment of large schools with high dropout rates is the fact that dropouts are three-and-one half times as likely as high school graduates to be arrested and 82 percent of inmates in the adult criminal justice system are dropouts. On December 31, 2000 there were almost 1.4 million people in federal and state prisons, and in 1996 the average annual cost was $20,100 per prisoner. In contrast, in 1996-97 an average of $5,923 was spent per student. This astounding difference of $14,177 per year suggests the magnitude of savings possible from small schools.

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