Statsguru: Why foreign students are 'golden goose' for the US economy

A host of actions by United States (US) President Donald Trump’s administration to restrict the intake of foreign students by American educational institutions has clouded the future of many Indians aspiring to study in that country. The recent moves include revoking Harvard university’s certification to enrol new international students, temporarily suspending the scheduling of new student visa interviews, and issuing directions for stringent social-media screening of foreign students before granting them F-1 student visa.

 

But that begs the question: Can the US afford to drive away its international students? It can’t, suggest data. According to Raghuram Rajan, former governor of the Reserve Bank of India, foreign student inflows have historically been a cornerstone of US innovation and economic leadership, and these measures could pose long-term risks to the US economy.

 

The US’ education service exports (measured by foreign spending on education-related travel in the US) jumped from $30.27 billion in 2014 to $50.19 billion in 2023, surpassing the pre-pandemic numbers. These allow the US to balance its rising merchandise trade deficit with countries like India and China. India’s share in the US’ education exports has grown steadily, nearly doubling between 2014 and 2023. Meanwhile, the share of Chinese expenditure on such exports started falling after 2020, the pandemic year, and reached 28.47 per cent in 2023. A crackdown on international students will not only hamper the US’ ability to attract and retain the best talent but also push international students to study in other countries, thereby affecting US’ education exports (Chart 1).

 

 

Of all the student enrolments in the US in the 2023-24 academic year, 5.9 per cent were those of foreign students – the highest share ever. The US received economic benefits to the tune of $26.79 billion in the 2013-14 academic year owing to international students studying in the US. That rose to $43.83 billion in 2023-24. Moreover, higher education service exports of the US created 380,000 direct and indirect jobs in the economy in 2023-24, as a greater number of international students flocked to the American shores to pursue education. Around 70 per cent of the direct jobs created in 2023-24 were in the higher education and accommodation sectors (Charts 2 and 3).

 

 

   

The share of Indians in all international students studying in the US more than doubled from 13.63 per cent in 2014-15 to 29.43 per cent in 2023-24. While the share of Indian students opting to study a non-degree course in the US declined in 2023-24, the share of those pursuing undergraduate or graduate courses reached nearly 50 per cent in 2023-24. Moreover, 40 per cent of all foreign students undergoing their Optional Practical Training (OPT) in 2023-24 were Indians – a 16 percentage point increase over 2014-15. An OPT programme allows international students on F-1 visas to work in the US for up to 12 months after completing their academic courses; students pursuing Science, Technology, Engineering, and Mathematics (STEM) courses are eligible for a 24-month extension. In this way, OPT serves as a bridge between education and employment, helping students transition to long-term employment in the US, akin to an H-1B visa sponsorship (Chart 4).

 

 

Personal and family income contributed significantly in funding the education of international students in the US. However, their share witnessed a decline from 66.5 per cent in 2015-16 to 54.5 per cent in 2023-24. On the other hand, the contribution of current employers of foreign students, as well as the colleges and universities in the US where these foreign students are studying, increased gradually to almost 41 per cent in 2023-24. This also includes the research grants given by the US federal government to the colleges and universities; these are distributed to students through the institutions (Chart 5).

 

 

The bulk of the foreign students coming to the US for education came from India and China. Every three out of four Indian students preferred to pursue STEM courses in the US in 2023-24. Meanwhile, this share was much lower in the students coming from East Asian countries like China, Vietnam, Taiwan and South Korea (Chart 6).