The Trump administration's new rule limiting how long international students can remain in the United States could reduce economic output by as much as $400 billion annually, weaken the country's innovation pipeline and discourage foreign students from choosing US universities, according to a report by the Peterson Institute for International Economics (PIIE).
The rule, issued in July and set to take effect in September, replaces the long-standing "duration of status" policy with a fixed period of stay of up to four years for most international students. After that, students would need to apply for an extension to continue their studies or remain in the country for post-graduation work.
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Concern over impact on STEM talent
According to the report, the policy gives US authorities greater discretion over whether international students can extend their stay for Optional Practical Training (OPT), a programme that allows graduates to work in jobs related to their field of study.
The report argues that this could sharply reduce the number of highly skilled foreign graduates entering the US workforce, particularly in science, technology, engineering and mathematics (STEM). It notes that US-trained foreign STEM graduates patent inventions at four times the rate of typical college graduates and establish high-growth startups at six times the rate of US-born graduates.
Economic costs
PIIE estimates that if the US experiences a sustained one-third decline in annual international student enrolment, the economy could lose between $200 billion and $400 billion in output each year, equivalent to roughly 0.7% to 1.3% of GDP.
The report also points out that higher education is an export industry for the United States, accounting for about 5% of US services exports. It argues that fewer international students would reduce export earnings while also limiting future innovation, entrepreneurship and productivity growth.
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Questions over government's justification
The report disputes the administration's justification that the policy is needed to prevent fraud and strengthen national security. It argues that evidence cited in support of the rule represents only a tiny fraction of millions of student visas issued over the past two decades and says existing monitoring systems already allow authorities to detect visa violations.
Instead, the report contends that the administration's stated objective is to reduce the number of international students remaining in the United States for post-study employment through OPT. It cites public statements by senior US immigration officials indicating they intend to limit work opportunities available to F-1 students after graduation.
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Calls for intervention
The report says Congress could overturn the regulation under the Congressional Review Act because of its economic consequences. It also argues that courts could strike down the rule on the grounds that the administration did not adequately assess its economic impact before finalising the policy.
According to PIIE, restricting international students would ultimately reduce the supply of highly skilled workers, slow innovation and leave the US economy less competitive over the long term.
