With the scramble for international student revenues now at fever pitch among Universities, cram schools, education service providers and investors, assessing the current and future market value of international education is no longer an academic exercise. For many countries, the recruitment and servicing of international students has reached a level of economic value that impacts bilateral trade balances, local community businesses, job creation and the financial health of its Universities. In the US, the combination of state and federal budget cuts with declining credit quality among many Universities has created further imperatives in the recruitment of international students who are often charged a premium tuition and pay in cash.
On the surface, estimating current market value is a straightforward calculation that includes tuition revenue, living expenses (including housing and food) and, where available, education-related tourism. There have been a range of forecasts, including those of the British Council, that have identified and modeled the most fundamental student growth drivers, from the propensity to study abroad to the rise of affordability and ease of mobility.
My purpose here is not to re-write these forecasts but to change the composition used in valuing the international student market in aggregate. From a quantitative perspective, the "international student market" is primarily focused on the Main English Speaking Destination Countries or MESDCs (e.g. US, UK, Australia, Canada, EU) which host the bulk of internationally mobile students in University degree programs. But a more comprehensive market valuation must capture all foreign programs delivered by Universities which includes those on a cross-border basis such as overseas branch campuses, twinning programs and joint or dual degree arrangements. This element of transnational education ("TNE") would include students that are enrolled in foreign programs inside their own home countries.
To begin, let's first establish a baseline value. Figure A provides the breakdown of current market value for international mobile students in the MESDCs according to the latest publicly available data and with added estimates for the EU (ex-UK) and Asia. In aggregate, this yields a current annual revenue of $81.6 billion with the US leading at $26.8 billion followed by Australia and UK at $15.5 and $16.1 billion, respectively.
The corresponding number of students that reflect this value in 2014 was approximately 2.5 million with an average student economic value of $30,520.
Figure A: Current and Projected Internationally Mobile Student Market Value (in US dollars)
Second, with historical growth rates over the past decade of between 2 and 3 per cent annually, the projected value in 2025 can be illustrated in two scenarios: moderate growth of 2.5% p.a. and high growth of 5% p.a. Note that I have assumed no tuition inflation or changes in relative currency rates over the period, which may render these results conservative from a dollar standpoint. Using these assumed growth rates, the projected market value in 2025 is between $119 billion and $139 billion, with a range of $35 billion and $46 billion in revenue generated annually in the United States alone. Splitting the difference brings an annual market value of $130 billion.
A third leg of the analysis captures the value of a transnational education. According to recent C-BERT data there are 201 international branch campuses in operation today (of which 77 are US Universities) and another 22 branch campuses under development. Foreign joint programs offer less reliable data but within the most active TNE host countries, all of which are located in Asia (China, Hong Kong, Malaysia, Mauritius, Thailand, Vietnam), one study found that 3,050 foreign programs were in operation at the end of 2013. For the purposes of this forecast, and based on my own work around the world, I could reasonably assume that there are 3,500 programs active worldwide today at an average of 75 students per program, which yields an enrollment of approximately 263,000. Add to this an average of 2,000 students per branch campus (or 402,000 students) and the total number of students in TNE would reach approximately 665,000 annually.
Since TNE data is unevenly reported and measuring average tuition for foreign programs is a conundrum as host country programs are often pegged at domestic tuition levels (as opposed to branch campus tuition which is more in line with international levels), we would have to assume a much lower average value per student. This is particularly relevant in large host countries such as China, Vietnam and India, and for this reason I have assume significantly lower average tuition of $3,000 per student for foreign programs and $15,000 at branch campuses. Based on our pool of 665,000 TNE students and tuition assumptions, the market is currently valued at $3.8 billion and, if we assume a modest 1.5% growth rate per annum, a level of $4.4 billion by 2025.
- An internationally mobile market of between $119 to 139 billion by 2025
- A TNE market value of $4.4 billion by 2025
- A total market value of close to $140 billion annually at top end
- An implied cumulative value over the ten year forecast period in excess of US$1 Trillion.
Admittedly, the paucity of hard data limits a more rigorous forecast and these figures are illustrative of what potential range in values the international education market may provide. On the other hand, the analysis includes only direct revenues associated with international study abroad or through TNE. What about the preparation that students receive and pay for prior to leaving their own countries? What of test preparation related to international study (TOEFL, IELTS) or other support services such as application processing, essay writing, and agency , foundation or "bridging" programs to undergraduate study? What about short-term, non-degree international programs, including English? Or the emerging popularity of online study and educational technologies that facilitate international study?
A more comprehensive valuation of the "international student market" would ultimately require these inputs as well.
Finally, it is worth noting that the tremendous enrollment gains and significant economic value that has been achieved in the international student market is only a rounding error when compared to total tertiary enrollments around the world, which reached approximately 196 million students in 2012 according to UNESCO data and are continuing to expand in places such as South Asia and across Africa. At minimum, this only underscores the potential future promise of the international student market which, at a current 2-3 per cent market share for tertiary students amidst insufficient supply, has a long way to run.
Note: an original version of this post contained a UK revenue figure of $10.7 billion; it should read US$16 billion after currency conversion.