International Students and U.S. Higher Education

The Issue:

After four decades of steady enrollment growth interrupted only briefly in the wake of the September 11th terror attacks, international student enrollments have recently declined. New enrollments fell by just over 3% between the 2015/16 and 2016/17 academic years. The decline in 2017/18 was even deeper decline — 6.6% — bringing the total, two-year decline in new enrollments to almost 10%. Several factors combine to explain the change: the political environment surrounding immigration in the U.S., tighter interpretation of student visa enforcement, and competition by new colleges and universities from abroad. Because international students make up almost 6% of higher education enrollments and an even larger share of students at flagship universities, international students contribute meaningfully to the academic and financial robustness of higher education institutions. Moreover, in a time of demographic decline particularly in the Northeast, declining international student enrollments reinforce negative trends in the domestic market. More broadly, through their consumption of housing, food and other goods, international students contribute substantially to economic activity in many states.

A nearly 10 percent reduction in new students seen in the two years beginning in 2016/17 is notable given the consistency of growth in international students to the U.S. in the previous 69 years.

The Facts:

• International student education has been a strong growth sector since the conclusion of World War II. According to the Institute of International Education, the total number of international students studying in the U.S. has increased from just over 25,000 in 1948/49 to more than 1 million today—averaging 5.6% annual growth for almost seven decades. This rate of growth far outpaces that of domestic enrollment, which itself has grown impressively by an average of 3% per year over the same period. As a result, international students today account for 5.5% of total U.S. higher education enrollments as compared to just over 1% in 1948/49. Focusing on recruitment in the last decade, growth in newly enrolling international students has been strong whether looking at those enrolling as undergraduates (up 59%), graduates (50%), or in non-degree programs (71%). While increasing numbers of students have been drawn from all parts of the globe, almost 80% of the total increase is attributable to two countries: China and India.
• International students contribute substantially to the financial health of their colleges and universities, local communities, and state economies. While international students clearly represent a sizeable subgroup in U.S. higher education as a whole, some institution types are more dependent on this group than others. Comparing total international student numbers to total enrollments by institution type (using the Carnegie classification) shows that these students account for more than 10% of enrollments at doctorate-granting institutions. Because only one in six international students receive institutional aid (compared to 44% of all first-time, full-time degree-seeking undergraduates whose average awards exceed $10,000) these students contribute disproportionately to net tuition revenue. One study estimates that public universities took in almost $10 billion in international student tuition and fees, accounting for more than one-quarter of tuition revenue at these institutions. When housing, food, and other retail expenditures are added, the NAFSA Association of International Educators estimates that the total, direct economic impact of international students rises to just under $40 billion; of this, $2.4 billion is due to international students who study at community colleges.  (Note: This estimate does not include any indirect “multiplier” effects that might result when someone who is paid by an international student subsequently uses their greater income to make additional purchases of their own. Nor does it include subsequent contributions made by international students who then live and work in the country following graduation.) Ten states receive more than $1 billion each in economic benefit, and California and New York each bring in more than $5 billion. In seven states, this financial contribution from international students accounts for more than 0.25% of state GDP. 
• The growing international student market has attracted new competition from established colleges and universities in the Americas and newly created schools in China, India, and elsewhere. Canada is a notable competitor in this market. Despite having a much smaller higher education sector, Canada had more than 500,000 international students in total in 2018 (compared with a little over 1 million total in the United States for academic year 2017/2018). This total accounts for well more than 10% of all college and university enrollments in the country. Even as international student enrollments in the U.S. have contracted, in Canada growth continues apace: after growing its international market by 20% in 2017, the country added another 16% in 2018. In fact, drawing heavily from Chinese and Indian markets served by the U.S., Canada represents a close substitute to American colleges and universities. What is more, India and China are no longer content to sit on the sidelines as millions of students look elsewhere for higher education. Responding to clear consumer desire for liberal arts options modeled after the U.S. system, both India and China have recently created liberal arts institutions of their own, and this has also been the case in places like Hong Kong.
• The U.S. has tightened enforcement, effectively imposing added costs on international students who study here. While immigration reform legislation shows little signs of moving through Congress, wide-ranging regulatory change under the Trump administration has and promises to change the international student experience. Among the more important proposed changes, the administration is considering changes to optional practical training provisions. Under this program, students gain work experience related to their program of study for one to three years following graduation. In addition to providing useful experience in the U.S. job market, the program can be a bridge to other visa opportunities. As such it is clear why the administration sees a connection to “protections of U.S. workers who may be negatively impacted by employment of nonimmigrant students.” But it is equally easy to see why prospective international students experience regulatory tightening as a reduction in the value of enrollment in the U.S. Similarly, Immigration and Customs Enforcement is considering a new maximum term for student visas. Under current rules, a student can remain in the country so long as they maintain their student status; no maximum term is defined at the outset. Under the proposed new rules, a student would need to re-apply for a visa to attend graduate school. Again, it is easy to imagine how this regulatory discussion would dampen demand by international students. Some reforms have already been initiated. For example, prior to August of 2018, the government counted days of unlawful presence beginning with the day after the government identified a violation of the student visa. Under new policy (currently enjoined during a legal challenge), days are counted back to the event that placed a student out of compliance—even if the student was not aware of the violation. The length of a violation determines how long (up to a decade) a student might subsequently be barred from the country. So, a student, unaware of a visa violation, may find herself barred from the country for up to a decade making degree completion in the U.S. is impossible. Anecdotal evidence suggests regulatory changes like this push prospective students toward alternative education destinations such as Canada.
• The most recent data show back-to-back years of declining numbers of new international students. The nearly 10% reduction in new students seen in the two years beginning in 2016/17 is notable given the incredible consistency of growth in this market seen in the previous 69 years. To date, there have only been two periods of decline in the total number of international students: a one-year decline of 3.2% in 1971/1972 and a three-year decline totaling 3.7% begun in 2003/2004 (see here). So, barring a major international incident like the events of September 11th, we have never experienced even a modestly prolonged decline in international student numbers. While declines in the numbers of entering international students have not yet led to a decline in the total number enrolled, that outcome now seems more likely to arise in the next year or two. Against the historical backdrop of near-constant international student growth, many look at the recent decline in new student enrollments with concern.