Australia lifts 2026 foreign student cap by 8%: Will Indians benefit?

Australia will raise its 2026 international student cap to 295,000, but tighter visa rules and housing shortages still trouble Indian applicants

After two years of curbing international student inflows, the Albanese government will ease its stance in 2026. On Monday, it announced that the annual target for new international student enrolments will rise from 270,000 in 2025 to 295,000 in 2026.

 

This increase signals a modest relaxation, but experts say the international education sector won’t find the road ahead any easier.

 

“The cap remains approximately 8 per cent below the pre-pandemic peak, indicating a cautious approach to expansion,” said Manisha Zaveri, joint managing director at Career Mosaic. “Additionally, the government has introduced sector-specific allocations and visa preferences favouring Southeast Asia, which may limit opportunities for students from other regions,” he told Business Standard.

 

 

Zaveri pointed out that the government’s tilt toward public universities and vocational education and training (VET) providers could reduce options for international students, particularly those considering private institutions. “These factors suggest that while the cap increase is a positive step, the international education system in Australia will continue to face complexities in the near future,” she said.

 

Mamta Shekhawat, founder of Gradding.com, a study abroad platform, agreed that challenges remain. “Institutions experience slower visa processing, creating uncertainty for both universities and prospective students,” she said. “Housing shortages and stricter eligibility criteria also mean the increase doesn’t translate into an open-door policy.”

 

What is the current system for 2025?

 

Under the 2025 framework, Australia has a target of 270,000 international students, divided into:

 

< 176,000 for higher education

< 94,000 for vocational education

 

Each institution receives a maximum allocation within these totals. However, after the Senate rejected a bill to impose legal caps in November 2024, the government shifted to a “soft cap” system. This means that once a provider reaches 80 per cent of its allocation, future visa applicants are pushed into a slower processing stream.

 

While not legally binding, these targets act as a regulatory brake.

 

What changes for institutions in 2026?

 

In 2026, all institutions will receive at least the same number of spots they were allotted in 2025. But the bulk of the new capacity will go to higher education:

 

< Higher education providers will share 196,750 student places — roughly two-thirds of the total

< Public universities can apply for additional places if they’re making “good progress” towards their 2025 cap

 

To access extra spots, universities must show they’re addressing two government priorities:

 

1. Expanding student accommodation

2. Strengthening engagement with Southeast Asia

 

The accommodation requirement links back to one of the key drivers of the student cap policy: domestic housing pressure. Institutions offering a higher number of student beds in relation to their enrolments may benefit the most.

 

The Southeast Asia focus builds on a 2023 report commissioned by the government on its economic strategy for the region. This shift could favour institutions with campuses in countries like Vietnam and Malaysia, or those that already enrol large numbers of Southeast Asian students.

 

Private not-for-profit universities will also see increased caps to bring them closer in line with public institutions. Other private higher education providers will receive a 3 per cent increase.

 

Will Indian students benefit from the cap increase?

 

“Yes, Indian students absolutely stand to benefit from Australia’s increased student cap, even with a stronger engagement focus on Southeast Asia,” said Mayank Maheshwari, co-founder and COO of University Living.

 

“India remains one of the largest and most important source countries for Australia’s international education sector, and that isn’t changing,” he said.

 

According to Maheshwari, the policy’s regional emphasis is more about diversifying than displacing existing markets. “The emphasis on Southeast Asia is about ensuring balanced growth, not about replacing one region with another.”

 

“With more seats available overall — rising from 270,000 to 295,000 — Indian students will have greater opportunities, especially if institutions continue to expand their capacity and support services,” he said.

 

Maheshwari also pointed to strong alignment between Australia’s offerings and Indian student aspirations. “Australia’s globally ranked universities, strong post-study work rights, and sectoral demand in areas like healthcare, IT, and sustainability remain attractive,” he said.

 

Why is Indian demand for Australia falling?

 

Despite the cap increase, interest from India is dipping sharply.

 

“Recent reforms in visa regulations have led to a 48 per cent drop in student visa approvals for Indian nationals, creating uncertainty and discouraging potential applicants,” said Zaveri.

 

“Several Australian universities have imposed regional restrictions, halting applications from students in states like Punjab, Haryana, and Gujarat — which represent a large share of the Indian market,” she added.

 

Rising costs have compounded the problem. “Tuition fees, housing expenses, and visa costs have made Australia less affordable, pushing students toward more cost-effective destinations,” said Zaveri. “Countries like the UK and emerging European nations now offer competitive alternatives with more favourable immigration policies.”

 

Shekhawat added that these developments have shifted perception. “These realities have forced many Indian students and families to reconsider Australia as their top choice despite the recently raised cap,” she said.

 

Maheshwari echoed that sentiment, pointing to broader global trends. “As highlighted in University Living’s Europe Report, destinations like Germany, France, and Italy are gaining traction due to lower tuition fees, strong public education systems, and increasing post-study pathways,” he said.

 

Still, Maheshwari added, “Australia continues to offer a high-quality academic environment and strong employment outcomes. The key will be sustained clarity on policies, adequate housing, and a renewed focus on affordability.”

 

Can Australian universities meet their 2025 caps?

 

That remains uncertain. India is Australia’s second-largest international student source country after China, but demand has dropped drastically.

 

In the first half of 2025, higher education visa applications from India were less than half of their 2023 peak, and 30 per cent below 2019 levels. Institutions that depend on Indian enrolments may struggle to reach their 2025 soft cap — which means they won’t be eligible for a higher allocation in 2026.

 

What happens next in Australian international education?

 

The raised cap comes just a month after the Australian government increased the student visa application fee — from A\$1,600 to A\$2,000. For many in the sector, Monday’s announcement was unexpected.

 

However, this is not a return to pre-pandemic policy settings. The government has confirmed plans for a new Australian Tertiary Education Commission to take over international student number regulation from 2027.

 

Maheshwari said student choices are now guided more by return on investment than visa policy alone. “While the recent visa fee increase is a factor, students are prioritising post-study work rights, career prospects, and institutional quality,” he said.

 

“With two to six years of post-study work eligibility under the Temporary Graduate Visa (subclass 485), strong demand in sectors like healthcare, IT, and sustainability, and globally ranked universities, Australia continues to be a preferred destination,” Maheshwari added.