The U.S. federal government's increasingly restrictive stance on international students is creating significant financial risks for American colleges and universities, particularly those heavily dependent on international enrollment for revenue, according to a new analysis by Moody's Ratings.
The credit rating agency's report, released June 30, warns that evolving visa policies, travel restrictions, and deportation measures are diminishing the perception of the United States as a prime destination for higher education, potentially leading to substantial revenue losses for institutions that rely on international students who typically pay full tuition.
According to Moody's stress test analysis, institutions with more than 20 percent of international students face the most severe financial exposure. The analysis examined three scenarios of international student declines — 10, 15, and 20 percent — and found that a 15% reduction in tuition revenues related to international students would minimally impact the EBIDA (earnings before interest, depreciation, and amortization) margins of 77% of rated institutions with a less than 0.5 percentage point decline in EBIDA from fiscal 2024 levels.
However, a small group of 15 universities, or 4% of our rated universe, could experience declines of between two and eight percentage points in EBIDA margins with a 20% fall in international students. These institutions, particularly those with initially low margins, would face significant financial stress.
The report notes that specialty schools face particular vulnerabilities. Art and design institutions and performing arts schools often rely on international students for well over 30 percent of their enrollment, making them especially susceptible to policy changes.
International students now account for 62 percent of those enrolled in graduate programs overall and have risen more than 50 percent over the past decade, while international undergraduates fell by 8 percent. Graduate students often pay higher tuition fees, making their potential loss particularly damaging to university revenues.
Many of these students are pursuing STEM fields, with 50% of Chinese and 73% of Indian students enrolled in such programs. A decline in the number of students from these countries could therefore have a larger impact on STEM programs.
