Sharply depreciating currencies in Asian and other emerging markets including Turkey, Brazil, Mexico, Colombia and Chile, accompanied by extreme volatility in China’s stock market which is affecting the economic confidence of that country’s middle-class, could have a knock-on effect on overseas student recruitment by universities in the United States and United Kingdom.
In some Asian countries – notably Malaysia and South Korea – there is some nervousness after the experience of the 1997 Asian currency crisis when the Thai, Malaysian and South Korean currencies lost as much as half their value against the US dollar. This led to many Asian students abandoning plans for overseas study.
The impact of the current currency crisis, while not as severe, has been much broader than that experienced in Asia in the late 1990s, when China and India were unaffected.
Between 10 and 12 August China devalued the yuan three times – the fastest drop for two decades – against the backdrop of a decline in economic growth and a stock market rout, which has had knock-on effects in many countries.
In India, the rupee has declined 10% against the US dollar since last year, invoking memories of 2013 and 2011 when sharp drops in the rupee value against the dollar and British pound led to parents reversing decisions to send their offspring abroad and a decline in the number of Indian students enrolling in universities in the UK, US and Australia for several years.
So far, however, the rupee is hovering around 65 to the dollar compared to a low of 48 to the dollar in 2011. With many students having already paid tuition fees at this stage in the admissions cycle, it is more difficult for families to back out, student recruitment agents in India said, adding that the impact would only be known during the next enrolment year.
Although the decline in the Malaysian ringgit, which started earlier than other currencies because of an ongoing political crisis sparked by a corruption scandal, is not as bad as its 1990s currency crisis, Malaysian students are very concerned.
"The recent and rather rapid decline of the ringgit has created considerable anxiety and the impact on costs for students planning to study overseas [beyond Asia] is considerable. We're looking at a deterioration of around 17% over the past year and so effectively pushing costs up by the same amount," said Christine Ennew, provost at the University of Nottingham Malaysia Campus.
Some Malaysian parents are still haunted by the 50% drop against the dollar in 1997-98 and fear the ringgit could fall further with dire consequences. According to a British Council survey in the 1990s, the number of Malaysian students enrolled in UK universities dropped by 44% in 1998 – the year after the 1997 Asian currency crisis.
Elsewhere, the Singapore dollar is down 11% against the US dollar compared to a year ago, while the Turkish lira is down 27% against the US dollar. Other Asian countries seeing sharp currency declines include Indonesia, Pakistan, Taiwan and Vietnam.
But the 1990s crisis may not be an indication of what is to come.
“The main reason is that the size and depth of the international education market was a fraction of what it is today, so there is no historical precedent,” said Todd Maurer, a founding partner of California-based Sinica Advisors, which specialises in emerging markets.
Given the huge expansion in cross-border education since then, the international education market cannot remain “immune to dramatic changes in currency values and their impact on affordability across an international student base drawn largely from developing economies”, Maurer said.
And although student decisions also take into account academic reputation, geographic proximity and prospects for immigration among other considerations, for many students and their families “a difference as much as 10% to 15% in cost can hit hard on household budget decisions”, according to Maurer.
An increase in costs of 20% to 30% due to further depreciations could really begin to reverse decisions to pursue an international education, Maurer told University World News.
Since the 1990s there have also been newer options such as overseas branch campuses in countries like Malaysia, Singapore and South Korea as well as China, that can provide a cheaper alternative at home and within the region for cash-strapped families.
“For example, students at NYU [New York University] Shanghai may be willing to pay the relatively expensive tuition, but save on living and travel expenses, which can be a significant proportion of overall study cost,” Maurer said.
"Many decisions are still being finalised," said Nottingham's Ennew, who anticipates that some students will be looking to join the Malaysia campus rather than incur the extra costs of study overseas. "But there is no evidence yet that this will be a dramatic shift."
For students already abroad, the Malaysian government – which finances a large number of scholarships for its citizens abroad – has tried to allay fears, reiterating that government scholarships will be paid abroad in US dollars or British pounds.
“The sponsorship the students receive depends on their needs and does not change according to the exchange rate,” Malaysia’s Higher Education Minister Idris Jusoh said in a post on his Facebook page. He added the government was also absorbing the rising cost of channelling the funds through overseas banks.
Malaysia’s Terengganu Foundation, a philanthropic organisation funding some 650 Malaysian students abroad annually, said it had allocated an additional 25% to its funds to top up scholarships to students in the UK and other countries.
Ja Sophian, a Malaysian student in the UK, receives a loan from the government agency Majlis Amanah Rakyat, or Indigenous People’s Trust, in British pounds but will have to pay it back in ringgit. “In addition my tuition fees have also increased, it is scary to even think about it,” Ja Sophian wrote on Facebook.
Self-funding students have had to turn to other philanthropic foundations for top-up funds.
Five Malaysian students in Britain and five in the US will this month be the first to receive financial aid from the Raja Zarith Negeri Johor Foundation which is associated with the Johor royal family.
Raja Zarith Sofiah Idris Shah, the Oxford-educated daughter of Johor’s sultan, made the announcement after expressing concern for Malaysian students abroad facing a declining ringgit.
“How much do they have spare to buy goods after they have paid for their rent and their daily commute? How much can their parents or families send them?” she wrote on her Facebook page on 20 August.
International students in the UK will also be affected by a tightening of the immigration rules and from September will no longer be able to work to support their studies, Malaysian students pointed out.
For currently enrolled students, some experts believe UK universities may have to provide some assistance to avoid international students dropping out for financial reasons, once the jobs route is closed off.
“Universities need to think of students’ non-academic needs,” said Nick Hillman, director of the Higher Education Policy Institute, a UK think-tank. “Universities do have a duty of care for international students as well as for their local students.
“For international students to be forced to drop out would be a tragedy.”
Australia and Canada
While the British pound has strengthened, making UK universities particularly vulnerable to cost-conscious students from Asia, the Australian and Canadian currencies have depreciated against the US dollar, making those countries a more affordable option for Asian students looking for an alternative to high-priced US and UK universities.
The Australian currency has depreciated by 22% against the US dollar, while the Canadian dollar has depreciated by 19% compared to June 2014.
Even with the devaluation of the yuan by the Chinese government – as well as a depreciating Indian rupee – an accompanying drop in the Australian dollar more than offsets recent tuition fee rises by Australian universities, Australian universities have argued.
But Maurer of Sinica Advisors believes the effects will be most evident in America, which could be particularly affected by changes in China. The US is often the first choice for Chinese students going abroad.
“The bottom line is that declining local currencies against the US dollar will have an immediate impact on international study in the US, particularly since higher tuition and related expenses are usually paid in cash by foreign students rather than financed over the long-term [by loans]," Maurer said.
Other experts note that with a high savings rate in China, with parents often saving for several years to afford an overseas education for their offspring, slowing economic growth in China over several years could have a stronger impact on family decisions than currency fluctuations.
The banking group HSBC said in a recent report that Asian families tend to cut back on other spending in order to send their children to university, including universities abroad.
Dominic Scott, chief executive of the UK Council for International Student Affairs, argued that with unprecedented demand from China for overseas education, there was unlikely to be a big impact on overseas university enrolments from that country.
“It would take an economic tsunami to dent demand from China and I think we are seeing an economic thunderstorm rather than a tsunami,” Scott said.
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