Do recruitment agents offer universities value for money?

International student recruitment has become core to the financial sustainability of universities and other higher education institutions in many countries. International tuition fee income has been used to offset the declining value of domestic fees and to subsidise core activities, such as research.

Education agents have become an increasingly important channel for higher education institutions to achieve their international student recruitment objectives, with some relying almost exclusively on agents for their annual enrolments. Agents facilitate the mobility of students from all corners of the world and work with education providers in many key destination countries.

Our new book, Student Recruitment Agents in International Higher Education: A multi-stakeholder perspective on challenges and best practices, is the first book-length contribution exploring the agent phenomenon and its many complexities.

It provides an evidence-based exploration of the phenomenon and aims to increase people’s understanding of the multiple dimensions of agent engagement, its contradictions and complexities.

One of the most controversial aspects of agent engagement is the associated remuneration, and how it influences the advice prospective students receive. A related question is whether it is value for money for universities.

A common remuneration arrangement is for institutions to pay commission based on a student’s first year’s tuition fee. This has typically varied between 10% and 15%, but can also be lower and increasingly much higher commission rates are being reported. Some stakeholders believe that commission payments incentivise agents to direct students to the highest-paying institutions.

Another key concern is the limited transparency characterising these payments. Often international students are not aware of these underlying financial arrangements, which raises concerns about their ability to critically evaluate the information provided by agents in order to make informed decisions.

Commission spending in three countries

The economic value of the global education agent industry remains a mystery. We decided to have a go at estimating the commission spending of universities in three key destination countries – the United Kingdom, Australia and the US – to provide a rough understanding of the size of the commission flow from universities to agents.

It is important to note that these estimates provide only limited visibility into the overall revenue received by education agents. Other payments, such as those made by students to agents, by those in non-university sectors as well as marketing investments and other monies paid by their partner institutions (such as bonus incentives), were excluded from our calculations. We have noted a number of other caveats below and are hoping that others will provide more sophisticated calculations in the future.

We used official records and data on the number of new university students enrolled in 2022. Then we used the estimates of agent-recruited students based on available evidence. These were 73% in Australia (according to the Australian government’s 2019 figures), 50% in the UK (as per BUILA, 2021), and 22% in the US (according to a Bridge Education Group report in 2016).

The US estimate is the most difficult to measure as consistent data are not available. In recent years survey data show that a growing percentage of US universities are utilising agents for international student recruitment, but the percentage of students enrolling through the agent channel has been less often reported.

Average tuition fees

We then used the data available on average annual tuition fees to calculate the fees paid by these agent-recruited students. For Australia we used the average undergraduate fee released by Studymove. For the UK we used the Reddin survey of UK university tuition fees.

For the US we used National Center for Education Statistics data on the numbers and types of higher education institutions and the average annual out-of-state tuition at those. We also included two-year community colleges.

To estimate the commission paid, we used a conservative commission of 12.5%.

The results of our calculation indicated that universities in the UK spent over £500 million (US$609 million) on agent commissions in 2022. The respective figure is AU$459 million (US$295 million) for Australia and US$84 million for the United States. This means that collectively the commission payments were at least around US$1 billion (or £800 million or AU$1.5 billion).

Obviously these are huge sums of money. But is commission paid to agents value for money? The commission payments represent only a minor fraction of the total international tuition fee revenues across the higher education sector.

Significant variations

However, this hides significant variations between institutions, with some paying commission on all or almost all of their annual international student intake and at much higher commission rates than the average. It also excludes other marketing and student recruitment costs paid to agents as well as activity through other channels.

Concerns about the increasing costs of acquisition and the impact on margins for core services and investment have started to emerge.

A number of caveats apply. Our calculations are non-scientific and should only be used as rough indicative estimates. For instance, the calculations exclude commissions paid for non-degree students and any progression commissions, meaning, for example, commissions paid for a student’s enrolment in a degree programme following commissions paid for their prior enrolment in a foundation programme.

The commission level used (12.5%) is also likely to be quite conservative. We are aware of universities paying commissions as high as 30%. Moreover, the quality and availability of data differs between countries and data from the most recent year were not always available (for example, when estimating the percent of students recruited via agents).

Call for more transparency

This article highlights the many complexities associated with calculating commission payments regarding data quality and availability. However, even these conservative calculations show the significance of commission flows from universities to agents.

Agent engagement also entails other major costs, such as the costs associated with due diligence, and training and monitoring of agents, as discussed in the book.

We call for more transparency in this area. We would encourage others to offer more detailed calculations, and include other countries, such as Canada, New Zealand as well as non-English speaking destinations.

Transparency is also important in the way institutions and agents communicate commission arrangements to prospective students. This would give prospective students the opportunity to evaluate the advice given vis-à-vis the financial arrangements underlying the advice.

Dr Pii-Tuulia Nikula is associate professor at Eastern Institute of Technology (Te Pukenga) in New Zealand. Most of Pii-Tuulia’s research focuses on education agent management and regulation. Vincenzo Raimo is a global higher education specialist and visiting fellow at the University of Reading, United Kingdom, where he previously served as pro vice-chancellor (global engagement). Eddie West is assistant dean of international strategy and programmes at San Diego State University (SDSU), United States, where he provides leadership of international collaborations and transnational education programmes, including SDSU in Georgia (Tbilisi). They are editors of Student Recruitment Agents in International Higher Education: A multi-stakeholder perspective on challenges and best practices.