Last year, foreign students contributed $18.8 billion to the American economy. How can we grow that figure?

Trade and job creation
Nov. 30 2010 10:14 AM

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Last year, foreign students contributed $18.8 billion to the American economy. How can we grow that figure?

Foreign exchange student. Click image to expand.
A student works in a college library.

Despite decades of Hollywood portrayals of the college years as one long, hedonistic, booze-soaked slog to adulthood, students who hail from beyond our shores have a very different perspective on American higher education. A decade ago, there were roughly 548,000 international students studying in the United States. For the most recent academic year (2009-10), that figure stands at approximately 691,000, and those students were estimated by an industry group to have contributed a collective $18.8 billion to our domestic economy through their tuition payments and living expenses. Even last year, when the global economy was in a trough, the number of foreign students grew by 3 percent, according to the Institute for International Education.

Like tourism, higher education is considered a services export, and it's an area in which the United States has a surplus. In the 2008-09 academic year, only about 260,000 U.S. college students studied abroad. Among those students, a whopping 96 percent stayed abroad for a semester or less. Experts say it's in our interest to boost the number of foreign students at our colleges and universities, not only for the revenue they bring to schools but to better prepare American students for a future in which industrial growth and innovation happen on an increasingly global scale.

According to IIE statistics, the majority of foreign students studying here come from Asia, with China and India ranking first and second, respectively. China's ascent to the top spot is a recent phenomenon. India spent several years on top until the 2009-10 academic year, when China's year-over-year increase of 30 percent helped it overtake India. While enrollment from other Asian countries is generally on the rise, the graying of Japan's population has led the number of Japanese students to decline.  The number of Saudi Arabian students has also climbed in the past five years, thanks to the aggressive King Abdullah Scholarships Program launched by the Saudi government to foot the bill for undergraduate and graduate students to earn their degrees in the United States.

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What do they study when they get here? Business administration is the most popular field, with engineering and life sciences close behind. Other popular majors include computer science and hotel management, all reflective of the industries that are growing fastest in emerging markets. In recent years, the demographics of this foreign student body have shifted from primarily graduate-level study; last year, about 47 percent were grad students while 33 percent were undergrads. (The remainder attended nondegree, English-language, and other programs.) The growing number of undergraduates can be attributed to major emerging economies' relatively younger populations, according to Allan Goodman, president and CEO of the IIE. There are many more young adults hungry for education, and their home countries can't keep up with the demand. Building classrooms isn't the hard part; emerging economies don't yet have a critical mass of homegrown professorial talent to staff new universities.

There are two other reasons why foreign student spending at American schools increased even during a global recession. First, a larger number of students enrolled, which shows how remarkably durable the appeal of an American education is. The other is the rising cost of tuition. This brings more money into schools' coffers now, but experts say it's a solution of diminishing returns; the higher tuition costs climb, the harder it is for domestic as well as foreign students to pay.

There's no denying that colleges like international students because they're a good source of revenue. According to the IIE, about 70 percent of students' families foot the bill for tuition and living expenses. Since these foreign students aren't eligible for federal student loans, scholarships from their home countries, like the King Abdullah program, make up a sizable portion of the rest. While grad students may get teaching positions or apply for fellowships to pay their way through school, undergraduates generally do not, making their larger numbers a potential boon for U.S. schools.

All these foreign students have unique needs, and meeting those needs takes resources. "I think many institutions have seen the international students as a source of revenue," says Harvey Charles, vice provost for international education at Northern Arizona University, which nearly doubled its international student enrollment in just three years and now hosts more than 800 international students. "An increasing number of colleges view them as cash cows but don't have the requisite infrastructure in place to support them. That would be a recipe for disaster."

For instance, some schools report a higher demand for intensive English instruction. This is due to the higher number of Chinese and Saudi Arabian students (Indian students generally learn English earlier in their academic careers), as well as to the shift to a greater proportion of undergraduates. Northern Arizona University offers international students a conditional acceptance, contingent on their passing an English-proficiency exam. This is an important priority for foreign students, says Charles, but it's difficult to administer. Foreign students also need advisers who can walk them through issues like working while in the United States and their tax obligations. Schools who want to court international students also need advisers who are able to evaluate courses from foreign schools to figure out if students transferring from a college in their home country can apply the credits they earned there.

Despite this extra degree of hand-holding, though, Charles says foreign students crave the American undergrad experience. When, at the suggestion of Chinese advisers who act as liaisons to the student body, NAU developed a fast-track, nondegree program for Chinese students in computer science a few years ago, the plan was a flop. The students wanted the longer-term, immersive experience.

Even as colleges invest in these labor-intensive resources, they face escalating competition from other countries that have woken up to the potentially huge post-secondary education market. Other English-speaking countries such as Canada and the United Kingdom are prime competitors, although Britain's recent restrictions on student visas, aimed at curbing what the government sees as abuse of the visa system, may give the United States an edge. In light of the burgeoning demand from China and other Asian countries, Australia is marketing itself as a closer-to-home alternative; and South Africa has been steadily growing its enrollment of international students, both from within and beyond the continent's borders.

In the future, education experts predict that more competition will come from the very countries from which we currently draw most of our foreign students. "The pre-eminence of the United States in this domain, while the envy of the world, is not guaranteed to continue," says Joel Cutcher-Gershenfeld, professor and dean of the School of Labor and Employment Relations at the University of Illinois at Urbana-Champaign, which hosted the second-largest number of foreign students last year, according to IIE data. "States are cutting back on funding for public universities, as other nations build increasing capacity." In countries like China and India, investment in higher education is booming; both nations have plans to build 20 new universities each.

Another puzzle for the higher-education industry is how to spread the wealth. Ivy League schools have no trouble attracting applicants from overseas, and foreign students also embrace some public universities, believing the education to be superior to that available at private colleges. But schools outside that relatively narrow slice face an uphill challenge trying to get on international students' radar. A general lack of awareness is complicated by the fact that in some other countries, students don't apply to a bevy of schools the way they do here, so there's less of an opportunity for American colleges to be a foreign student's second choice or "safety school."

Despite the decentralized nature of our collegiate system that puts much of the recruitment effort on schools' shoulders, it's not entirely up to them to do the heavy lifting. The International Trade Administration's U.S. Commercial Service division participates in student fairs overseas, and the State Department runs an outreach program called Education USA, which is aimed at foreign students. In contrast with the frustrations experienced by the U.S. tourism industry, the IIE's Goodman says the State Department has been accommodating of foreign students' needs in recent years. "After 9/11, there was a shakeout period, but I think the United States has moved very responsibly to higher education's concerns," he says. "It's now a much more predictable process," he says of the student-visa application process.

Higher education specialists say an influx of international students has benefits beyond the bump they provide to schools' bottom lines. "We're moving toward a global knowledge economy," says Cutcher-Gershenfeld. "Cross-cultural literacy is necessary. As you bridge across cultures, you discover that your basic assumptions aren't the same."

Exposure to viewpoints shaped outside U.S. borders help today's students compete better in an increasingly global workforce. Charles points out that this mélange of different cultural values and backgrounds in the classroom gives professors a great teaching opportunity. "International students bring a kind of diversity to the academic environment that's increasingly necessary," he says. "That's a huge benefit."

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Martha C. White is a freelance writer in New York.

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