UK universities grapple with who to prioritise: International or domestic students?

UK higher education faces a credit crunch. (Source: Getty Images Europe/Bloomberg)

Britain has a world-class higher education system that attracts students from across the globe, generates $32 billion a year in exports and serves as a significant source of prestige and influence for the country and its values. It also has a funding model that doesn’t work — and that’s becoming more and more of a problem.

Pore through the data on UK universities and the extent to which the sector has become dependent on fees from overseas students is immediately apparent. The share of income from non-European Union students almost quadrupled since the turn of the millennium to 19.1 percent in the 2021/22 academic year. A record 680,000 foreign students arrived that year, blowing past a government target of reaching 600,000 by 2030. The percentage of non-UK students rose to 24 percent of the total, more than double the share two decades earlier.

That’s all good, it might be argued. International students pay significantly higher fees than their domestic counterparts and therefore help to subsidise the costs of educating Britain’s young people. This is, after all, why universities have made such efforts to recruit from overseas. The extent of the growth represents a concentration of risk, though. “The higher education sector faces a looming crisis,” a House of Lords committee said in September, arguing the current system of funding was “not sustainable.” It said there was a worrying complacency that the income from international-student fees could be counted on for the long term, despite an increasingly competitive global environment and the risk of geopolitical shifts disrupting student flows.

The more immediate threat may be a domestic political backlash. Evidence has been building that universities’ pursuit of higher-paying overseas intakes is squeezing out British applicants. Admittedly, the aggregate data don’t suggest this. Local student numbers have continued to grow, albeit more slowly than the overseas cohort, indicating overall access to higher education has expanded.

The more salient question, though, is where and what the domestic cohort studies. Admission to the most competitive courses at the most desirable institutions is getting harder. The Russell Group of 24 leading universities admitted 86,000 domestic students in 2022, down from 102,000 in 2020 and the lowest level since 2014, the Financial Timesreported last year. The Sunday Times added some granular detail to the picture last month with a report showing how 15 universities including
Durham, Bristol and Exeter are offering pathways to overseas students with far lower exam grades than they demand from UK applicants.

Universities UK, which represents 142 institutions, contested the findings, saying its admissions processes had been misrepresented — but nevertheless agreed to review them. The Sunday Times allegations tally with other media reports, including a January article in the Financial Times that said the University of York was lowering entry requirements for some overseas applicants in response to financial challenges. Either way, the financial incentive for universities to attract more higher-paying international students by lowering the academic bar is clear.

To some extent, Britain’s university chiefs can’t be blamed for seeking alternative sources of revenue. That’s effectively what the government
encouraged them to do by freezing annual domestic tuition, which has been held at £9,250 ($11,655) since 2017. If fees for UK students had risen in line with retail price inflation since 2012, when they were £9,000, they would be about £14,000 by now. Overseas students pay as much as £38,000, and an average of £22,200. The Russell Group says English universities run a deficit of £2,500 per year on each domestic undergraduate.

Recruiting overseas students to supplement a shortfall in revenue is reasonable. When this income stream becomes so important that institutions are willing to prioritise international applicants over better-qualified local students, though, it’s a sign that the system’s incentives have become skewed. Britain should be careful where this leads. Universities are public institutions, and British parents who judge their children to have missed out on a place unfairly will feel justifiably aggrieved. This has the potential to feed into a politically toxic debate over Britain’s immigration policies. The government has already stopped most international students from bringing family to the UK, under rules that took effect at the start of last month.

There are no easy answers. Universities urgently need to put their finances on a more stable and sustainable footing. That’s likely to mean a combination of increased fees for UK students and more state funding. Neither looks palatable or even particularly practical right now, given the cost-of-living crisis and other claims on public spending priorities — particularly the National Health Service, which is in a parlous state with waiting lists near record highs.

Overseas students are also a market that the UK shouldn’t take for granted. Even if their number may have risen too far, too fast, they should remain a valued component of Britain’s education offering — for both economic and soft-power reasons. There are signs that the government’s anti-immigration rhetoric is already having an effect: Overseas student acceptances fell 36 percent in January compared with a year earlier, according to data provider Enroly.

On the bright side, that may alleviate some of the public anxiety over surging overseas student numbers. But it will also widen the black hole in university finances. Britain’s higher-education chiefs have some difficult conversations ahead.

Matthew Brooker is a Bloomberg Opinion columnist. Views do not represent the stand of this publication. 

Credit: Bloomberg