A Passage to America: University Funding and International Students
Substantial state subsidies to public higher education in the United States have historically allowed in-state students at public colleges and universities to pay significantly lower tuition and fee levels than their out-of-state counterparts. With the marked decline in state appropriations for higher education in recent years, some university leaders are faced with the choice between increasing tuition levels, cutting expenditures – and thereby reducing resources per student, or enrolling a greater proportion of students paying full out-of-state tuition. With strong economic growth in countries like China and India, the pool of undergraduate students from abroad who are academically and financially prepared to attend U.S. colleges has increased markedly in the last decade. In this paper, we examine whether declines in state appropriations have led public universities to enroll more foreign students who are able to pay the full-fare tuition. For the period between 1996 and 2012, we estimate that a 10% reduction in state appropriations is associated with an increase in foreign enrollment of 12% at public research universities and about 17% at the resource-intensive AAU public universities. These increases in foreign enrollment are associated with declines in in-state enrollment at the relatively selective institutions among public universities. Our empirical results, in combination with a model of university behavior, tell a compelling story about the link between changes in state funding and foreign enrollment in recent years.