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America’s Stealth Education Export

Two new reports show the impact of the record number of foreign students studying in the United States.  According to the Institute of International Education, more than 723,000 international students attended higher education in the United States during the 2010-2011 academic year, about 3.5 percent of the total higher education enrollment. 

While the number of foreign students might tell us something about the attractiveness of U.S. universities, their spending is classified as a U.S. export--albeit one that happens without anything leaving the country.

China, India, and, South Korea remain the top origin countries for international students in the United States.

Reflecting the increased purchasing power of Chinese consumers, the number of Chinese students grew by 23 percent in 2010, five times faster than the overall number of foreign students in the United States. This is in line with a longer term trend showing the higher spending capacity of the large emerging countries. Ten years ago, the number of foreign students from Brazil, India, and China (the so-called “BIC countries”) in the United States was 21 percent of the entire contingent of international students. Now, they account for more than 37 percent.

And these students spend, as documented by an Association of International Educators (NAFSA) report for the last academic year.

International students spent about $20.2 billion last year in the 50 U.S. states plus the District of Columbia, an almost eight percent nominal increase from the previous year. While the top recipients remain the large states (California, New York, and Massachusetts), the states that grew the most their earnings from education exports are a rather surprising list: South Dakota, Delaware, Arkansas, Oregon, and Kentucky. Universities in South Dakota increased their income from foreign students by almost 40 percent, well above the 15 percent gain in the number of foreign students. With much lower tuition and living costs, colleges in these states have become more competitive in attracting foreign students.

Conversely, the District of Columbia, where a foreign student had to spend about $35,500 last year, witnessed decreases both in terms of the number of foreign students and their spending.

The good news is that people from emerging markets still want to buy U.S. higher education. The bad news is not all states and universities understand the powerful effect of this U.S. export. The spending of foreign students in the United States is money brought into the U.S. economy from abroad, as good as any earnings from exporting airplanes, cars, or pharmaceuticals. These funds do not go only to universities (as out-of-state tuition), but also for goods and services in local communities. Besides the immediate financial effect, these students also bring the world to the United States and create connections with places around the world.