Reflecting on the Economic Value of International Students
Date: June 1, 2017
It is graduation season, and family and friends are gathering to congratulate this year’s graduating class. But instead of just focusing on their impressive degrees, thesis accolades, and star turns on the stage or sports field, those of us feting the graduates have something else we should recognize them for: Their hefty contributions to the American economy throughout their years of study.
International students have long been known to be an important source of revenues for our country’s $542 billion higher education industry. They typically pay higher tuition than domestic students—at public universities, often two or three times what is paid by state residents—and receive less financial aid, representing a crucial source of revenue for U.S. colleges and universities. And rather than take spots from American students, this sizable subsidy has been found to actually expand opportunity for them. Kevin Shih, a professor at Rensselaer Polytechnic Institute, for instance, found in recent research that for every 10 international graduate students enrolled in a U.S. graduate program, eight additional spots were created for U.S.-born students as a direct result.
With that that in mind, we use estimates on the economic activity and jobs created and sustained from international students produced by NAFSA, a national association for professionals working in international education, to calculate the total economic contribution of international students during their studies in the United States. We found that international students who received their diplomas in 2016 contributed $19.6 billion to the American economy over the course of their studies. Moreover, in just the last year of their programs, they created or supported more than 81,000 U.S. jobs. These positions were in a variety of industries, from educational services, to accommodation, to retail.
How did they contribute so much? Largely from their spending on tuition and course materials, as well as rent and other everyday expenses (gas, groceries, food, and the like) for themselves and their dependents. Travel for visiting family members played a role too. Regardless of the source, however, their massive economic impact was no doubt important to the U.S. education system, particularly in an era of shrinking budgets for many publicly-funded schools. To put the contribution of international students in context, $19.6 billion amounts to 86.6 percent of the amount requested by the Department of Education in 2015 for Pell grants, the largest federal grant program that helps low-income students pay for college.
PUTTING THE ECONOMIC CONTRIBUTION OF INTERNATIONAL GRADUATES IN CONTEXT
|Economic Contribution of 2016 Graduates||$19.6B|
|Amount Requested for Pell Grant Funding, 2015||$22.6B|
Unsurprisingly, the states where international students made the largest contributions were those with the largest public education systems. The 29,276 international students who graduated from New York schools in 2016 contributed $2.9 billion to that state’s economy throughout their time in school, while the 23,792 California graduates added $2.5 billion. In Massachusetts, the equivalent figure was $1.5 billion, while in both Texas and Pennsylvania, it sat at around $1 billion. Below we show how international students’ contributions in these states made up 45.9 percent of the national total.
ECONOMIC CONTRIBUTIONS OF 2016 INTERNATIONAL GRADUATES, BY STATE
|New York||California||Massachusetts||Texas||Pennsylvania||Other States|
Breaking it down by degree level, we find that most of this contribution stems from undergraduate enrollees. International students earning bachelor’s degrees contributed $9.1 billion to our economy during their years of study. Meanwhile, master’s students added close to $7.3 billion, while the equivalent figure for international PhD students was roughly $3.2 billion.
BREAKING DOWN THE CONTRIBUTION OF INTERNATIONAL GRADUATES BY DEGREE
Although data on the exact number of international students graduating this year is not yet available, there are many reasons to believe that the contributions of this year’s students will be similar, if not higher. According to the Institute of International Education, enrollment by international students has risen steadily in recent years. Since 2011, the number of international students in the United States has increased by at least 4 percent every year, going from around 760,000 in the 2011-2012 academic year to more than 1 million in 2015-2016. But there are worrying signs some of this might be changing. According to a recent survey of 250 universities in the country, almost 40 percent of institutions reported a decline in applications from international students hoping to enter in the 2017-2018 school year. If this translates into an actual drop in international enrollment, it could destabilize university budgets, and potentially, the quality of education and facilities available to all.
Our estimates use data from the Integrated Postsecondary Education Data System from the U.S. Department of Education and NAFSA’s International Students Economic Value Tool. Using IPEDS, we first determine that 208,896 international students graduated during the 2015-2016 school year. Then, we examine NAFSA’s tool, which specifies the annual tuition and living costs per international student in each state as well as the number of jobs created or sustained by the economic activity of international students. The years covered in this analysis range from 2011 to 2016 and the dollar values of economic activity are adjusted for inflation in 2016 dollars. Based on data from the National Science Foundation, we place the length of time to graduate for PhDs at five years. For the purpose of this study, we estimate international master’s students finished their degrees within two years on average and fix the tenure of international college students at four years, a conservative assumption.