In a recent speech to campus, Penn State University president Neeli Bendapudi announced various budgetary cuts, noting that “These are not one-time challenges or situations that are going to go away.”

President Bendapudi is correct: the systemic enrollment issues facing higher education institutions will require schools to not only shore up their finances, but also to stabilize future revenue by looking towards new sources of enrollment, such as international students.

While China has historically been the leading source of international students for U.S. colleges and universities, the number of Chinese students studying in the U.S. has declined from 373,532 in the 2019/2020 academic year to 289,526 in the 2022/2023 academic year, according to Statista.  Many Chinese families are now looking at schools in other countries due to the high cost of education in the U.S., perceptions of crime, and the deteriorating relationship between the U.S. and China. Colleges will need to find other countries with burgeoning middle classes ready to send their students abroad to fill the gap.

Budget Crises—Before the Enrollment Cliff

Colleges and universities across the United States have been facing budget shortfalls. This is despite the fact that the so-called enrollment cliff won’t begin in earnest until 2026. The enrollment cliff is due to a decline in U.S. birthrates following the 2008 recession that is expected to result in a decline in college student enrollment in higher ed beginning in the middle of this decade. Given this expected decline in American students, it has been long believed that international students could provide an enrollment solution for many institutions.

Financial strain is evident across diverse institutions, from prestigious universities like the University of Chicago and Penn State to community colleges like Eastern Gateway Community College. The challenges stem from a number of factors, including the depletion of Higher Education Emergency Relief Funds (HEERF), higher interest rates, increasing employment and operational costs, as well as ongoing declines in enrollment.

To address these challenges, institutions are adopting a variety of strategies such as cost reductions, efficiency improvements, revenue diversification, enhanced fundraising efforts, and strategic collaborations. These solutions will be short-lived, however, if declines in enrollment continue after 2026.

China’s back—or is it?

According to the Wall Street Journal, the number of student visas issued to students of Chinese descent fell by more than 50% between 2019 and 2022. 2023 saw a small reversal of these fortunes, with student visas back up more than 47% compared to the year before, but still down overall.

It remains to be seen whether the recent decline in Chinese student enrollment will reverse.  U.S. institutions are facing stiff competition from institutions in Britain, Canada and Singapore who are eager to exploit any concerns that Chinese families have with sending their kids to the U.S.

As the landscape of international student enrollment in U.S. colleges evolves, it’s becoming increasingly evident that Chinese students may not be the future cornerstone of this demographic. Luckily, there are several “new Chinas” on the horizon.

India, Nigeria, Vietnam—a new source of students?

According to The Chronicle of Higher Education, India has overtaken China in American college enrollment. Factors driving this trend include India’s growing youth population, limited capacity and quality in domestic universities, and increased affordability of foreign degrees due to a burgeoning middle class and access to student loans.

Indian students are drawn to American colleges for their reputation, diverse program offerings, emphasis on internships and job placements, and the Optional Practical Training (OPT) program, which allows graduates to gain work experience in the United States. This combination of factors has contributed to India’s edge over China in overall student numbers.

Furthermore, the “Open Doors” report from the Institute of International Education also found increasing enrollment from other nations with rising incomes. Countries such as Vietnam and Nigeria, which are also experiencing expansions in their middle class, saw gains in American enrollment by 5 and 22 percent respectively.

The growth in international student enrollment spanned across all degree levels and fields of study, with a particularly significant increase in graduate programs, marking the largest growth in the report’s history. This trend reflects changing demographics and interests among international students, especially from India.

A sustainable trend?

Colleges and universities should recognize that many international students are primarily interested in graduate programs. The key question is whether colleges and universities can invest the time and resources to attract and retain students at the undergraduate level.

Colleges should also consider the price sensitivity of these students. Despite the growth of the middle classes in India, Nigeria, and Vietnam, institutions must navigate the challenge of offering competitive tuition rates while maintaining quality education. Adapting to this reality requires innovative financial strategies and value propositions that can appeal to international groups with heightened price sensitivity in comparison to previous cohorts of Chinese students.

Further, in a competitive landscape where students from these countries have more options closer to home, such as in Singapore and Japan, American universities must differentiate themselves by highlighting unique opportunities, diverse learning experiences, and strong support systems to remain attractive to international students.

Finally, there are a host of macro issues that should be considered.  The strength (or weakness) of a country’s currency can significantly impact the cost of education for international students.  Relationships between countries, such as the relationship with the U.S. and China, can discourage families and students from seeking an education in the U.S., as well as encourage them under the right circumstances.  Another factor that can influence international students is the state of the job market for the field in which they want to study – both in their home country and in the U.S.

Other solutions

Many higher education institutions want to attract international students, but few have the international brand recognition needed to drive a flow of applications. Schools seeking to create global appeal will face the challenge of investing to establish brand identity in new markets with limited financial resources.

To survive and thrive, schools that cannot easily attract international students must explore alternative revenue streams within the domestic market. Strategies such as expanding executive education programs, offering certifications, hosting high school summer programs, and developing standalone master’s degree programs can generate additional income without relying heavily on international student enrollment.