International students contributed almost US$27 billion to the US economy in 2014, which corresponds to a 12% increase versus 2013 when the total was US$24 billion.
The growth has been driven largely by demand from students from upper-middle-income economies and countries with large national scholarship programmes, which marks a significant shift from before the 2008 financial crisis.
By 2017, the global middle class is projected to increase its spending on educational products and services by nearly 50% – from US$4.4 trillion in 2012 to US$6.2 trillion.
Pull factors in student-receiving countries such as higher quality of education, better living conditions and stronger labour market demand have driven the expansion of international student mobility since the 2008 financial crisis, and today growth in outbound student mobility from upper-middle-income countries such as China, Brazil, Mexico and Turkey is outpacing growth from both low- and high-income countries.
Acknowledging the potential benefits international students can bring on board, we found that Canada, Australia and the UK are prompt in understanding the big-picture impact of international students.
In the US, except for NAFSA’s annual economic impact report, voices on the benefits of international students to the national economy and institutional welfare are yet to be heard.
Here we reflect on the economic impact these new mobility trends and drivers are having on host countries at the national, local and institutional levels. We first compare enrolments of international students in the top four English-speaking host countries (the US, UK, Australia, and Canada), before looking in more depth at the economic contribution of international students to the US economy and select US universities.
We conclude with a look at the implications of the economics of student mobility for international enrolment management at US institutions of higher education.
International enrolment growth is being driven globally by students from low- and middle-income countries. An examination of economic trends related to international education reveals that since 2000 upper-middle-income economies – those with a gross national income, or GNI, per capita between US$4,126 and US$12,745 – are the ones driving growth in outbound student mobility.
The total number of outbound international students from upper-middle-income economies jumped 161% between 2000 and 2012, as compared to only 29% from high-income OECD countries.
Since 2006, the growth of student numbers from high-income non-OECD countries such as Russia, Saudi Arabia, Singapore and the United Arab Emirates has largely been driven by government scholarship initiatives such as the King Abdullah Scholarship Program and the Brazil Scientific Mobility Program.
Leap in enrolment in the US
According to the Institute of International Education, or IIE, one third of all internationally mobile students across the globe study either in the US or the UK. Despite the negative impact of the 2008 financial crisis, the total enrolment of international students in the US increased 42% between 2008 and 2014.
But enrolments have been declining in the UK since 2012 due mainly to the introduction of stringent visa policies. Meanwhile, Australian enrolments have started to rebound after a significant decline beginning in 2010, and Canadian enrolments are continuing a steady decade-long upward trajectory.
A survey conducted by HSBC and Ipsos MORI in 2014 found Canada to be the most affordable study destination among the big four English-speaking destination countries. At a cost of nearly US$30,000 a year, Canadian tuition fees and living costs averaged 29% less than in Australia, which was found to be the most expensive study destination.
Average annual cost of tuition fees and living costs in the top four English-speaking host countries in 2014 were:
- Australia – US$42,093
- US – US$36,564
- UK – US$35,045
- Canada – US$29,947.
Economic contribution to the US
Based on the World Education Services, or WES, analysis of IIE Open Doors data, the total number of international students in the US increased 55% between 2003-04 and 2013-14. Self-financed students accounted for three-fifths or 60% of this growth, and today account for nearly two-thirds of all international students in the US.
Over the same period, the number of international students receiving foreign government scholarships or foreign university funding almost quadrupled from 13,699 to 66,147 and, likewise, those funded by an employer jumped five times, from 10,000 to 50,000. Meanwhile, the number of students sponsored by a US college or university has declined to 19%, down from 23% in 2003-04.
The implications are clear: strong consumer demand and partnerships with foreign governments and foreign universities are currently the main drivers of international enrolment growth in the United States.
An analysis from the Brookings Institution shows that after the 2008 financial crisis the US experienced a sudden drop in enrolment growth from high-income OECD, lower-middle-income, and low-income countries.
By contrast, there was continued growth from upper-middle-income economies fuelled by strong consumer demand, and also from high-income non-OECD countries where students are more likely to be funded by the government.
According to the latest IIE Open Doors data, enrolments from China, India, and Saudi Arabia accounted for 81% of the 8% of overall annual growth in international students in the US between 2013 and 2014.
But the main sources of student funding from these countries varies significantly. According to a segmentation study by WES, students from China are most likely to have the financial means to afford a US education. Saudi students also generally have strong financial resources but they are more likely to be supported by government-funded scholarships, while Indian students are the most likely to rely on loans and institutional financial aid.
The boom of international students in the US has been particularly notable in public higher education institutions, increasing 24% from 2007 to 2012. Overall, public institutions enrol 64% of all international students.
On average, states in the US are spending 23% less today per student on higher education than in 2008. The Pennsylvania State System of Higher Education, for example, has reduced its permanent workforce by 540 employees and frozen or discontinued new enrolments in 198 programmes.
Arizona’s university system has cut more than 2,100 positions, and consolidated or eliminated 182 colleges, schools, programmes and departments. The University System of Georgia merged Southern Polytechnic State University and Kennesaw State University to reduce administrative costs.
Vital for economic sustainability
In this context, international students have been a vital source of economic sustainability and growth for state and local economies throughout the recession. The University of Iowa reported that international students spent US$33 million on tuition alone, US$67 million a year in the local economy, and contributed more than US$245 million to the state each year.
Overall, the net contribution (total contribution from tuition, fees and living expenses minus US support) of international students to the US economy has been significant, growing 72% since the 2007-08 academic year, from US$16 billion to US$27 billion.
Direct contributions for tuition and fees alone nearly doubled during the same period, from US$11 billion to almost US$20 billion, while US funding support only grew by 49% over the same period from more than US$6 billion to nearly US$10 billion.
The three US states that attract the highest absolute number of international students – California, New York and Texas – on average netted US$31,000 per international student enrolled at an institution of higher education during the 2013-14 academic year. The total net income from international students in the state of California amounted to US$4 billion, around US$3.3 billion in New York and nearly US$1.5 billion in Texas.
Conclusions and recommendations
International students have become integral to the financial health of many US higher education institutions, but the impact goes beyond money spent on tuition fees and living expenses.
According to NAFSA, for example, for every seven international students enrolled, three US jobs are created or supported, and in the 2013-14 academic year international students created or supported a total of 340,000 jobs nationwide.
International students are also helping to fill skills shortages at a time when the US share of the world’s science and engineering graduates is declining. A previous WES report noted that international students were a vital source of enrolments for STEM – science, technology, engineering and mathematics – fields. In 2013 more than one in three international students was enrolled in a STEM field.
International students also help promote a global learning environment. A recent study from Duke University shows that American students who actively interact with their international classmates are more likely to enhance their own self-confidence, leadership and quantitative skills.
The road ahead for US institutions of higher education will see increased competition from new education destinations such as China. The global share of international students in the US has decreased from nearly 23% in 2000 to 16% in 2012, despite large absolute gains.
International students in US institutions of higher education today account for just 4% of total US tertiary enrolments. As such, the institutions have the capacity to enrol significantly more international students.
Expanding international student mobility to major source countries is driven by pent-up consumer demand in fast-growing economies and also by an increasing number of scholarship programmes from international students’ home countries.
Higher education institutions should continue to expand their recruitment efforts and improve their international student enrolment strategies by actively seeking partnerships with foreign governments, institutions and corporations, while also understanding the needs and behaviours of specific international student segments.
At the same time, they need to be mindful of the gap between student expectations and their actual experience after they arrive on campus and ensure that future enrolment strategies are sustainable.
Alejandro Ortiz, Li Chang and Yuanyuan Fang are researchers with World Education Services, or WES, a US-based research and advisory non-profit organisation. An edited version of this article appeared in the WES monthly newsletter.
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