In Changing Universities: Online Instruction, Budget Transparency, and the Cost of Education, Bob Samuels makes a crude estimate of the cost of online courses versus mega-lecture courses (the two approaches to education popular with university administrators, because of their relatively low cost).
I believe his numbers serious underestimate the costs of both, as he only counts the costs of lecturers, and not that of TAs. It is true that lecturers are only paid about $7500 a course, but a course of 200 students is likely to have 4 TAs, at a cost of $11000 each (more fairly, $5800 each, since the rest goes back to the University as tuition). So the direct instructional cost is more like $31k, or $155 per student, not counting benefits for the lecturer. He also neglects a lot of the overhead costs, like amortizing the cost of classrooms and the costs of cleaning and maintaining buildings, roads, libraries, and other essential infrastructure. He underestimates the cost of course development for traditional courses, though he includes it for online courses (which are, admittedly, far more expensive to develop).
I think he’s right that the University is not going to save significant amounts of money by offering big courses online, and that going online may actually raise costs, but his analysis is not careful enough to establish that. The UC Online pilot project has spent a lot of money developing very few courses. The edX consortium has also dedicated huge amounts of money to deliver a very small number of classes—confirming my view that edX is primarily and advertising vehicle for MIT and Harvard, rather than an education-delivery vehicle.
The cost of developing traditional courses can be fairly high. I’ve spent about 400–500 hours developing a new lab course, even before preparing any of the lab handouts or ordering the parts for the students, which will take another 100 hours (more than full time over winter break). At my current salary and benefits, that is a development cost of about $30k. Delivering the course to 20 students will cost another $30k–40k (counting my time, ⅓ of a course for a lecturer, and an undergraduate group tutor), for a cost of around $3500/student. Of course, in future years, the class size will double, the development costs will have been amortized, and we may even alternate years between Senate faculty and a lecturer, reducing the cost to about $1000/student, as he estimated for somewhat smaller classes.
Incidentally, if you are interested in what goes into designing an engineering lab course, I’ve been making notes on the course design on this blog. I’m up to 86 blog posts (about 200–300 pages) of notes for the course design—and I still haven’t started writing up the web pages or course handouts.
I’m still strongly of the belief that it is in courses like this lab course that the University is strongest, and that attempts to reduce the cost of education with mega-lectures and online courses reduce the quality much faster than they reduce the cost.