International students: There will be winners and losers

We have spent the last few weeks talking with universities in the United Kingdom and with education agents around the world about some of the big issues facing the sector. There is both excitement and nervousness in the air about international student enrolments in 2021 and application rates for 2022.

As we predicted in University World News at the start of the pandemic, international student mobility has been severely impacted by the pandemic in the short term, but, as has happened in the past after major financial crises, health scares and in the aftermath of terrorist attacks, student mobility has started to rebound and is growing again. This is exactly what UK universities are seeing now.

Although detailed data is not yet publicly available from the Higher Education Statistics Agency, many UK universities are reporting very healthy overall international student enrolments for 2021-22 and most are reporting significant increases in applications from non-European Union students for 2022-23, including a rebound from China and large increases in applications from India, Nigeria and elsewhere.

The big exceptions, of course, are enrolments and applications from the EU. UCAS reports that applications from EU nations are down 19% at undergraduate level compared with last year, and most universities are reporting a continuing decline in applications at postgraduate level, including for premium-priced programmes in business and law where, even before Brexit, all students were paying higher rate tuition fees.

Why international fees matter

While university executives continue to digest the government’s response to the Post-18 Education and Funding Review, (the Augar Review), it is clear that most universities in England will continue to face the dual challenge of finding ways to increase average tuition fee revenue in the face of domestic student undergraduate fees remaining fixed for at least another two years, while also searching for operational efficiencies and budget cuts to meet spiralling costs as inflation hits a 30-year high.

The critical importance of the international tuition fee revenue stream to subsidise research is well understood and has been covered in detail by the Higher Education Policy Institute.

But it is not just the research subsidy which UK universities rely on. International students are disproportionately represented in the newer, more expensive university and private sector purpose-built student accommodation; they spend longer periods on campus than many domestic students and therefore spend more money on university catering, sports facilities and on other paid-for activities, directly contributing to university bottom lines as well as to the overall UK economy.

This is why universities in England need international fee income to keep growing in order to just stand still.

They are planning to do this by a combination of increasing both international student numbers (and we have heard from many universities which have double-digit growth baked into their short- and medium-term financial plans) and tuition fees (where they feel that there is sufficient price elasticity in the market).

Three future challenges

So, are these English universities we have been speaking with correct to be optimistic about continued growth in international student tuition fee revenue? Will this year’s growth in applications to UK universities convert into enrolments and students sitting in university lecture theatres and libraries, and living in university accommodation? Will this year’s application growth rate continue in 2023 and beyond?

Three challenges we think UK universities need to be aware of and to plan for now are: (i) competition, especially at undergraduate level; (ii) conversion rates from application to enrolment; and (iii) continuation and completion rates for those international students we are recruiting now and planning to recruit tomorrow.

Competition, especially at undergraduate level

While we continue to predict growth in international student mobility, we are very conscious that growth rates have always been uneven across study levels and destinations, and are subject to many international as well as domestic factors.

The UK has clearly benefited from its main English-speaking competitor countries either remaining closed to international students for longer, as in the case of Australia and New Zealand, or where they have been slower in getting their act together in terms of student application management, visa processing and travel and welcome arrangements, as in the case of the USA and Canada.

And credit where it is due: the UK government and UK universities did get their act together more quickly than their competitors did, and made sure they got their welcoming messages right, including the reintroduction of longer post-study work opportunities.

But the competition is not going to remain silent. Australia and New Zealand are now open to international students again and their universities are eager to make up for lost time and to rebuild their market share of international students; and it is the same for Canada and the USA.

Competitors are re-evaluating their offers to international students, including work rights, and their universities are equally anxious to re-establish their international student recruitment activities and to rebuild student enrolments.

So while the short duration of the UK’s masters degrees gives home institutions a competitive advantage, the real pressure is on undergraduate demand. Continued declines in EU applications, which in 2022 are 50% down compared with 2020, increase the reliance on students from China to make up for lost ground.

The UK’s growth markets of Nigeria, India and Pakistan are most popular for those seeking admission to one-year postgraduate programmes. We have also been hearing from education agents in India that more students than before are applying to universities in more than one country, keeping their options open to see what happens on borders, COVID, work rights and scholarships.

Now is definitely not the time for complacency for any UK university wanting to sustain international student growth.

Conversion rates from application to enrolment

Some of the largest application growth rates this year, as signalled by the sponsored student visa data, are coming from countries which tend to convert at much lower levels, such as India, Nigeria and Pakistan – which in December 2021 grew by 164%, 415% and 256% respectively compared with 2019-20.

Nigeria, in particular, has among the lowest offer-to-enrolment rates of all countries. Also, much of the growth in applications from India is coming from tier-two and tier-three cities, places like Ahmedabad and Ludhiana.

Conversion rates from India have also traditionally been quite low, but might be lower still as applicants from emerging markets fail to win much-needed scholarships to support their overseas study ambitions.

So, while the current numbers look positive, the long-term sustainability of demand is also threatened by the rising levels of inflation worldwide. We know from past experience that these current markets are highly price-sensitive.

The message is simple: do not assume that traditional average conversion rates will continue at the same levels, and be prepared for much greater demand for scholarship support and an impact on enrolments where scholarships are less likely to be available.

Continuation and completion rates

Of course, universities rely on the tuition fee income which students bring to keep rolling over as they move from one semester, one year of study and one programme to another.

While both continuation and completion rates have been much higher for international students than for domestic students in the UK, there is some anecdotal evidence emerging that students from some markets within predominantly English-speaking countries, from less affluent segments and without a tradition of international education, have been struggling to adapt to the requirements of university-level study in the UK.

These students are not benefiting from the preparation that a majority of students from non-English speaking countries get from foundation or pre-sessional English and study skills programmes before starting their degree courses. And these are some of the same students who also need to find part-time work to sustain their time in the UK.

There is a real concern that financial pressures together with less preparedness for international study may impact international student continuation and completion rates.

This is all speculation based on anecdotal evidence from conversations with university staff and education agents, but it is certainly something universities should be monitoring and, where necessary, putting in place measures to better support these ‘new’ students and help them to achieve their ambitions.

Winners and losers

The competitive environment is hotting up, both internationally and between UK universities, for international students. It is clear that there will be winners and losers and, for some English universities, there is likely to be a double whammy of poor domestic recruitment and below-target international student enrolments.

For some universities, the heightened demand for UK study and application growth today is very good news and may help them to achieve international student targets and slightly more diverse international student populations in the short term.

However, they need to be prepared for changes in demand patterns and ensure that those students who are recruited are supported to succeed. Universities are reliant on their students’ success in so many ways.

Vincenzo Raimo is a global higher education specialist and a senior adviser to the Oxford International Education Group. Janet Ilieva is director and founder of Education Insight.