Growth in foreign degrees – But are they worth it?

Overseas universities queuing to set up affiliated degree programmes, joint degrees and foreign branch campuses in Asia need to do their sums carefully and understand the job market in those countries, or they will fail.

In particular they need to pay attention to the economic value of their degrees in the local market, including the payback period local students might encounter for the higher fees charged, and job prospects with foreign-affiliated degrees compared to those from local institutions, according to recent research carried out by the Parthenon group.

Karan Khemka, partner and head of education practice at Parthenon, warns that India may not bring the returns hoped for by many foreign providers looking to set up affiliated degrees.

“Despite the view that India offers a huge market for foreign providers, growth [of enrolment in foreign-linked courses] in India is less than 5%, with many affiliated programmes operating below capacity,” Khemka said.

“It is in Vietnam, with a much smaller programme, that the fastest growth is apparent.” He said the main reason was that the return on such degrees for Vietnamese students, as well as those in Malaysia, Singapore and Indonesia, is far higher than for students in India.

In particular the market for foreign degrees in Vietnam is growing at 15% a year in terms of enrolments, against the 5% growth in India. “Vietnam’s red hot,” Khemka told University World News.

In India most foreign-affiliated courses “are sub-capacity, they are unfeasible, and investors behind these programmes are constantly evaluating what’s wrong and whether or not to shut them down", according to Mumbai-based Khemka, who presented some of the study findings at the Observatory on Borderless Higher Education conference held in Malaysia last month.

One reason is that a programme taught in English cuts far less ice than in countries like Vietnam and Indonesia. “Unless a university has an ‘Ivy League’ reputation, employers may even prefer a graduate from an Indian university,” Khemka said.

But he noted that the figures speak for themselves, particularly when the value of the degree is calculated in terms of the salary differential compared to a local degree.

In Indonesia a local degree takes a year to pay back once a graduate is in work but it takes double that time to pay back the cost of an internationally affiliated programme, taking into account the increase in salary and job prospects that the international degree offers.

In Malaysia, where it takes around 18 months to pay back the cost of a local degree, an international programme can be paid back in two-and-a-half years, in salary terms. In Vietnam the cost of an international programme takes four years to pay back, compared to around two years for a local institution.

But in India the gap between the payback period for a local programme compared to a transnational course is “dramatic”, said Khemka. The debt incurred during an international programme takes three times longer to clear than a local programme – almost six years, compared to two years for a local programme.

Despite the demand for higher education in India, it is simply far less attractive for a student there to embark on a foreign-delivered programme than in Vietnam or Malaysia because “the economic value you are creating for a student in Malaysia is far stronger than the economic value you are creating for a student in India”, Khemka explained.

It is a similar story when lifetime earnings are computed.

In India the salary difference over a lifetime for an international degree compared to a local one is marginal, while in Vietnam the salary difference over a lifetime can be 50% more for an international degree.

Khemka stressed that foreign institutions must provide an economic return for students.

If they cannot differentiate themselves from the bulk of private universities and secure for graduates a higher starting salary and a higher lifetime salary, it will not be possible to charge high fees.

Should the Indian government open the doors to foreign providers to set up branch campuses, he predicted there would be an “initial rush followed by big disappointment and recriminations”.