Graduate medical education (GME) in the United States is financed largely by the federal government through the Medicare program. Medicare regulations developed in 1997 resulted in cuts in the direct, indirect, and disproportionate-share components of GME funding. Given this situation, it is increasingly important for programs to understand what the true costs of residency training are and how they are allocated. Using a faculty time survey and the yearly residency budget, the authors report on such an analysis for their own training program (at Michigan State University) for the 1996–97academic year. Overall, the response rate for the faculty time survey was 77% (N = 28). The identified program costs of supporting 20 psychiatry residents, excluding donated time, were calculated at $1,563,193, or $78,159 per resident. Eighty-four percent of costs were for personnel. These costs are consistent with those derived from studies of family practice and internal medicine training programs. Awareness of the costs of training will assist training directors in budget negotiations with their institutions.