President's Blog

Fewer international students coming to the U.S. should be a top policy concern

With Kirk Heffelmire

In preparation for my coming Federal Reserve Bank of Richmond board meeting, where we plan to discuss, among other things, how recent international trade policy changes will affect the economy of the 5th district, we had a look at recent trends in international student recruitment in our institutions of higher education. We may not immediately think of it in these terms, but higher education is a major export industry. International students contribute to creating major economic value and hundreds of thousands of jobs across the nation, in addition to pumping resources into our universities, enriching our campuses culturally and intellectually, and contributing to our talent pools in critical industries. Unfortunately, there are reasons to be concerned.

In the academic year 2016-17, students from outside the U.S. contributed $36.9 billion to the U.S. economy and supported 450,000 jobs. International students also bring their cultures and experiences to the U.S. and enrich the learning of all students.

Over the past 10 years the economic benefit of international students to the U.S. has more than doubled to reach nearly $37 billion. In the fifth district, the economic benefit in 2016-17 was just under $2.9 billion and over 83,000 international students studied at the district’s institutions. These students supported over 35,000 jobs in the district. These values are all just under 8 percent of the national totals.

Despite the value of international students, there is now greater evidence that international students are losing interest in U.S. higher education and shifting to other countries.

The most recent visa data from the U.S. Department of State shows a 17 percent drop in the number of new international students from FY2016 to FY2017. For students from India, the one-year decline was 28 percent, a significant loss because India has been a major source of students for U.S. colleges and universities.

Also, between fall 2016 and fall 2017, there has been a 1 percent decline in new enrollments and a 3 percent drop in applications to U.S. graduate schools from international students, according to a recent survey. The declines were more common in master’s degree programs and in less research-focused institutions. This marks only the second time international applications and new enrollments to graduate schools have both declined in the same year since the reporting began in 2004.

Also, between 2016 and 2017, the National Science Foundation reported that the number of international students in the U.S. fell by 2.2 percent among undergraduates and 5.5 percent among graduate students.

In the most recent data from the Institute of International Education, new international enrollments declined this past year by an average of 7 percent across 500 institutions included in a snapshot survey. About 45 percent of institutions reported a drop in international enrollments this year. In a 2017 survey of higher education admissions directors, 76 percent noted that international recruitment had become more difficult over the past year. Other survey data revealed that about 40 percent of schools enrolled fewer international students in 2017 than in 2016. A majority of graduate business programs in the U.S. saw declines in applications for 2017 compared to 2016 while a majority of Canadian and European programs saw increases.

The impact of fewer international students on U.S. campuses is likely to be greater for non-flagship universities in the Midwest that have seen international student enrollments as financial lifelines. Beyond the immediate financial impact of fewer full-tuition paying students, there are also broader concerns about U.S. innovation and economic dynamism. Higher education has been an important source of talent and a way for the best and brightest of the world to enter the U.S. Also, international students make up the majority of those in computer science and electrical engineering graduate programs at U.S. universities and their loss would not be easy to compensate for.

The decline in international students is the result of heightened competition from universities in other countries, less financial support from source country governments, and the more restrictive immigration policies and postures in the U.S.

Canada in particular has been expanding its presence on the global stage of higher education along with their other improvements in education. International student enrollment in Canada grew by 10.7 percent from fall 2016 to fall 2017. The most recent national budget included $4 billion Canadian of new funding for science and research over the next five years, described as the largest investment in science and university research in Canadian history.

Canada has also expanded efforts to recruit top scholars, and many of the most recent hires have come from the U.S. The Japanese government aims to double the number of students studying abroad by 2020, and Canada has seen faster growth as a destination for Japanese students compared to the U.S. over the past three years.

The share of international students relying on their source country government as the primary source of funding has declined from nearly 8 percent in 2014-15 to 5.7 percent in 2016-17. The majority of international students rely on personal or family funds. The proportion of students who are primarily supported by their host institutions in the U.S. has also declined from about 20 percent to 15 percent from 2014-15 to 2016-17.

In a survey of international student recruitment professionals, the reasons for declining interest in U.S. colleges and universities included concerns about visas and immigration policies and feeling unwelcome in the U.S. Some academic research has shown that the short-term effects of visa restrictions are to divert flows of students from one country to another while policies that allow for temporary permission to work after graduation have longer-term effects encouraging international student growth.

The UK is also experiencing a similar loss of student interest due to Brexit. In the year after Brexit compared to the year prior, the global share of international students going to the UK fell from 28 percent to 25.6 percent. Over the same period, the share coming to study in the U.S. fell from 35.7 percent to 31.9 percent while the share going to Canada doubled from 4.9 percent to 10.6 percent. Research from a Danish university suggests that German universities are likely to gain while the UK loses as it becomes harder for researchers to collaborate with UK universities.

Overall, there is not good news about the market for U.S. colleges and universities among international students. There are multiple sources of evidence pointing toward a slowdown or retreat of international student enrollments. The reasons for this include concerns about immigration in the U.S., rising competition from other countries, and declining support from source countries.