1. News
  2. Explained

What is the Economic Importance of International Students in the US Economy?

Jul 16, 2020 10:05 AM 4 min read

On July 14th, the Donald Trump administration made an abrupt policy reversal, rescinding a decision announced only last week that could have sent hundreds of thousands of international students in the US packing.

The Policy

This concerned the decision (announced last Monday) to force foreign students studying in the US to leave the country or risk deportation if their universities switched to online-only classes in the fall semester due to the coronavirus pandemic.

Students on existing visas seeking to remain in the US would have been required to transfer to a school with in-person, contact teaching or attend one that offered both remote and on-campus learning.

Those who had returned to their home countries before the pandemic and those who had applied to join American universities in the near future would have been subject to the same rules.


The Impact

The announcement shocked universities, students and their families. 

In 2019, the total number of international students enrolled in US colleges was 1,095,299. And the impact was particularly brutal for Indian students, who make up the second largest international group studying in the US, after China.

India's Foreign Secretary Harsh Vardhan Shringla also raised the issue with American authorities during an online meeting earlier this week, stating there is a need to keep in mind the role of educational exchanges and people-to-people relations between the two countries as they played a key role in development of the overall ties.


The Rationale

One obvious motivation behind Trump’s order could be the US President’s well-documented dislike for large-scale immigration to the US, illegal or otherwise. He has seized upon the uncertainties posed by the COVID-19 pandemic to issue weeping executive orders to curb immigration to the States.

Only a month ago, he moved to freeze the distribution of temporary work visas like the H-1B, H-2B, J and L till the end of 2020.

The raison d'être for the White House’s actions last week, however, is likely to be a pressure tactic to get universities to reopen for the fall semester. 

The US is still far away from its pandemic peak - and new infections are surging - but the Trump administration is eager to reopen the economy and reimpose normalcy.

It has insisted that schools and colleges return to in-person classes as soon as possible. The Department of Education has downplayed concerns that students would be exposed to infections, and even threatened to withdraw federal funds from schools that refuse to reopen. And shortly after last week’s announcement of the new guidelines, Trump tweeted this:



The Backlash

Harvard University and Massachusetts Institute of Technology filed a lawsuit seeking to revoke the order, calling it “arbitrary and capricious". Almost 60 other US universities filed a brief supporting this lawsuit. A coalition of state governments, dozens of big companies and colleges also filed "friend-of-the-court" briefs opposing the rule.

A hearing was scheduled for July 15th, but by then the White House had already walked back the order.


American Universities and International Students

The main argument of the opposing universities was that Trump’s order was unconstitutional and would adversely affect their functioning.

“Unconstitutional” is a legal debate so let’s set that aside. But what to make of the “adversely affect their functioning” argument?

After all, as of 2019 foreign students made up only about 5.5% of the total US student body. 

But the data reflects the out-of-proportion significance of foreign students for American universities and the US economy.

#1: In 2018, the total economic contribution of international students was estimated to be almost $45bn. They also helped support 460,000 jobs in the country.

#2: Foreign students often pay more tuition fees than their American classmates. This is crucial revenue for universities, some of whom bring in over $10m in additional revenue thanks to this.

#3: Then there’s the demographic angle. The number of high-school graduates across the States is projected to increase by only 0.2% over the next nine years, compared to an increase of 6% over the previous nine years. This means international students are becoming increasingly important to keep classes full, tuition revenue up and institutions thriving.

#4: Besides economic stats, there are the numerous other advantages that come with enrolling the brightest young minds in the world. 40% of American Nobel laureates since 2000 were immigrants, 62 world leaders received higher education in the US (more than any other country), and 23% of unicorn startups in the US were founded or co-founded by international students.

“Brain drain” for countries like India or China, but “brain gain” for the US!


Congratulations! You've made it to the end. Now, how about laying back and listening to a podcast on Business and Finance? Subscribe to our Podcast Newsletter and equip yourself with ideas and insights into how to figure out and conquer the financial universe!