It’s no mere coincidence that Jeffrey R. Brown, the dean of the Gies College of Business, at the University of Illinois at Urbana-Champaign, is also a scholar of risk management. At his first faculty meeting four years ago, Brown fretted that his school had become, like many American universities, overly dependent on a single source of money — roughly a fifth of tuition revenue came from Chinese students. “I saw our reliance on China as a risk,” says Brown, noting that 800 or so of the university’s nearly 5,800 Chinese students attend the business school. “At the time, I was concerned that China could pull the plug on students coming to America. But then the U.S. political landscape shifted, and we were vulnerable to changing visa and immigration policies here, too. Both were threats we could not control.”
Brown approached the problem as a risk manager, which meant doing what no school has been known to do before: buying insurance to protect against a sudden drop in Chinese enrollment. The three-year policy requires the university to pay $424,000 annually for up to $60 million in coverage. The insurer, Lloyd’s of London, will pay out a claim if a specific incident — a visa ban because of a government action, for example — causes the number of Chinese students in the colleges of business and engineering to decline by 18.5 percent over a 12-month period. The political risks have only grown since the policy went into effect. The trade war with China, visa restrictions and the anti-immigrant rhetoric coming from the White House are making it more complicated for international students to come to America. “It’s a tough environment right now,” Brown says. But the insurance gives him peace of mind. The school continues to invest in China, he says, but now “with the confidence that we are not doubling down on risk.”
Over the past decade, the explosion in the number of international students has turned education, almost by stealth, into one of the most vital American exports. The idea that a student taking classes in Iowa City or Ann Arbor can be counted as an export might seem strange. In economic terms, however, the student’s situation is not so different from, say, a Japanese company buying American soybeans: Foreign money flows into the United States from abroad — except that in this case, the product doesn’t leave the country.
Nearly 1.1 million international students attended American colleges and universities in 2017. They generated $42.4 billion in export revenue, more than double the amount eight years ago, according to the Bureau of Economic Analysis. (Because far fewer Americans study abroad, the United States ran a $34.2 billion surplus in education in 2017.) Nafsa, a nonprofit group that supports international education, estimates that students from abroad created or sustained more than 455,000 jobs in the United States, almost nine times the number of American coal miners. The value of education is almost double the revenue from America’s top agricultural export in 2017, soybeans ($21.6 billion). When other student spending is factored in — food, cars, clothes — education’s total export value rivals that of pharmaceuticals ($51 billion) and automobiles ($53 billion). “In the public at large, there’s little awareness that higher education is one of America’s biggest exports,” says Rajika Bhandari, senior adviser for research and strategy at the Institute of International Education. “Or that this export drives American competitiveness.”
America’s reputation as a beacon for the world’s students, however, is now faltering. In 2016, for the first time in decades, new enrollments of international students in United States colleges and universities fell, by 3.3 percent, according to an Institute of International Education report. In 2017, the decrease steepened, to 6.6 percent. An 8.8 percent drop in graduate students from India led the decline, while China’s torrid pace of enrollments slowed. The downturn, which the institute reports continued in the fall of 2018, albeit at a lesser rate, is not solely in response to American politics. The first drop, after all, reflected decisions made in 2015, when Donald Trump was just one of 17 Republicans battling for the party nomination. Other factors have also been altering the calculus for international students: rising tuition costs in the United States; growing competition from other countries like Australia and Canada; heavy investment in higher education in their home countries; and a fear of American gun violence.
Still, the “Trump effect” acts as a powerful deterrent. Shortly before the 2016 election, I spoke with Chinese students at the University of Iowa who were so convinced that Trump’s travel ban would extend to Chinese nationals that they canceled trips home out of fear that they would not be let back into the United States. Some of their friends in China opted to study in England to avoid the uncertainty. Their fears seemed unfounded at first. But as the trade war has escalated, along with reports of espionage and intellectual-property theft, Chinese students find themselves squarely in Trump’s cross hairs. In November, according to The Financial Times, the White House even briefly discussed the idea of imposing a total ban on Chinese students — a radical option that inevitably brings back memories of the Chinese Exclusion Act, which kept out most Chinese for nearly 60 years before the outbreak of World War II.
As a practical matter, the tightening of American visa restrictions hits students harder than dark grumblings. Beyond generating more visa denials and delays — the issuance of F-1 student visas declined 17 percent from 2016 to 2017 — Washington is targeting foreign students who apply for graduate work or training in technological areas. In June, citing national-security concerns, the government announced that visas for Chinese students in robotics, aviation and high tech could be reduced to just one year from five years. Last month, 65 colleges and universities signed a letter supporting a legal challenge to a new United States government policy that would make it easier to ban international students for overstaying their visas, calling international students “essential to the fabric” of higher education.” Esther Brimmer, executive director and chief executive of Nafsa, laments the hostile turn: “It could take us years to rebuild the reputation of America as a nation that welcomes all to our campus communities.”
Some universities are trying to buck the trend. Chief among them is the University of Illinois, where a commitment to welcoming Chinese students stretches back more than a century. In 1906, when the policy of excluding Chinese was still in force, the president of the university, Edmund James, wrote a letter to President Theodore Roosevelt proposing a scholarship program to bring some of the first Chinese students to American universities. “China is upon the verge of a revolution,” he explained. “The nation which succeeds in educating the young Chinese of the present generation will be the nation which for a given expenditure of effort will reap the largest possible returns in moral, intellectual and commercial influence.” Roosevelt agreed. Over the next half century, the University of Illinois received roughly a third of all Chinese students who came to the United States.
Today, again, Illinois is leading a pack of universities trying to “reap the largest possible returns” from international students — and, with its insurance policy, to avoid any sudden losses. The number of Chinese students at Illinois, 5,797, remains one of the highest in the country, but in 2018, for the first time in decades, Chinese enrollment there dropped, by 2.2 percent. (The business school, Brown says, suffered no decline.) Even as national policy tightens, universities are intensifying recruitment efforts beyond China and India and trying to make students feel more welcome. In recent years, Purdue University has begun to reduce its intake of Chinese students in a move that will diversify its student body.
It’s shortsighted to think of this issue solely in terms of revenue: International students and scholars also spur American innovation and growth. Today, nearly a quarter of the founders of billion-dollar United States start-up companies first came here as international students, according to the National Foundation for American Policy. And the National Science Foundation says that more than a third of the postdoctoral researchers in science, engineering and health in American labs are temporary visa holders. “We don’t have enough Americans trained for these jobs in engineering, computer science, even economics,” Richard Startz, an economics professor at the University of California, Santa Barbara, says.
For all the growing concerns about national security, the United States can’t afford to close the pipeline of talent and tuition that supports its education system and drives its economic future. As Yu He, a postdoc research scholar at the Stanford Institute for Materials and Energy Sciences, wrote in the online magazine ChinaFile, “If the secret sauce to the success of the United States is the ability to attract and retain ‘the best and the brightest,’ why is it shooting itself in the foot today?”