Foreign Students Price Americans Out of Their Own Workforce

Foreign Students Price Americans Out of Their Own Workforce

March 27, 2025

Author’s Note: This article is from my weekly “Top of Mind” email, sent to subscribers every Thursday. For more content like this and to receive the full newsletter each week, enter your name and email under “SIGN UP FOR OUR WEEKLY NEWSLETTER, ‘TOP OF MIND,’” located on the right-hand side of the site.

With headlines dominated by Columbia University caving to the Trump administration’s demands—sparking cheers and outrage—you may have missed that the H-1B debate has resurfaced.

I’ve long argued for strict limits on the program—if not its outright elimination. I’ve also detailed how universities play a central role in qualifying foreign graduates for American jobs and have said that colleges and universities should limit the number of international students they admit—or, better yet, end their dependence on foreign students altogether.

Of course, my stance has not gone unchallenged. Defenders of the status quo, both left and right, argue that the H-1B program is necessary because of labor shortages in critical industries, particularly in tech and engineering. These jobs often require advanced degrees, and, they claim, there simply aren’t enough Americans with the right qualifications.

But why aren’t enough Americans qualified? I believe the answer lies in U.S. universities’ reliance on foreign students.

Foreign nationals flood U.S. universities knowing that an American degree secures their pathway to an American job—thanks to the H-1B program. Universities, eager to cash in on foreign tuition dollars, prioritize international admissions, driving up costs and pricing out American students. As my colleague Kali Jerrard put it, “International students are paying disproportionately high out-of-state tuition and housing rates compared to local American students.”

Knowing they can extract more from foreign students, universities continually raise tuition, making degrees unaffordable for middle-class Americans. The result? A vast majority of U.S. graduate students in computer science and engineering are international students—the supposed labor shortage isn’t due to a lack of American talent, but to Americans being priced out before they even get the chance.

Thus, the very program that claims to address a talent shortage has, in reality, manufactured one.

By allowing universities to chase foreign money at the expense of American students, we’ve created a vicious cycle where Americans are systematically excluded from the very education that would have qualified them for the jobs that foreign nationals are effectively buying access to.

“Computing PhD graduates are in high demand,” Fast Company reports. But “pursuing a doctorate is not an economically viable decision for many Americans.”

In 2023 … U.S. computer science doctoral programs admitted about 3,400 new students, 63% of whom were foreign … Doctoral students in research universities … do not receive a salary. Instead, they get a stipend. These vary slightly from school to school, but they typically pay less than $40,000 annually. The opportunity cost of pursuing a doctorate is, thus, up to $100,000 per year. And obtaining a doctorate typically takes six years.

The average American doesn’t have the finances to float themselves through six years of grad school—but wealthy foreign nationals, often backed by their governments, do.

So, if we want to reclaim the American workforce for Americans, we must start by reforming our universities’ financial incentives. Until we break their dependence on foreign tuition dollars and drive costs down, Americans will continue to be priced out of the education system that would secure their place in the workforce.

Follow Jared Gould on X.

Image: “Student Visa Day at the Embassy (June 9, 2016)” by U.S. Embassy New Delhi on Flickr

Discussion

Frank

March 28, 2025

The foreign/domestic student tuition differential is garden variety price discrimination. As such, it makes for a larger number of students. Domestic students are priced into college. Nobody is being priced out of anything. .

Adults pay more at the movies. They are not taking anything away from the children who pay less.

Reply
1. Dr. Ed
  
  March 30, 2025
  
  “Adults pay more at the movies. They are not taking anything away from the children who pay less.”
  
  That’s like saying that those who sneak in without paying aren’t taking anything away from anyone else — or that shoplifters don’t raise prices for everyone else.
  
  Shoplifting is easier to explain because you can calculate shrink easier.
  
  Let’s say I am selling widgets that I buy for $1 and sell for $2 and lets say I only sell ten.
  So I make $20 and that pays the $10 for widgets, $3 in labor, $2 in rent, $1 in utilities, $2 in taxes, and $2 in profit.
  
  Now say someone steals two widgets — I only have $18 dollars, to get to $20 I have to get an extra $2 from the widgets I do sell. That means the price of widgets is now $2.25.
  
  The same thing happens if I give free widgets to people because of the color of their skin — say I give away two and sell eight, the price of those is $2.25 instead of the $2 it otherwise would be.
  
  Now say they are a semester of college that costs $20,000 and I don’t charge two kids — the other eight pay $22,500.
  
  Now there is the incremental cost factor — say all ten pay $20,000 and then I stick two more into the classroom for free. If I’m not increasing my costs, i.e. hiring a second professor, renting (or building) a bigger classroom that uses more HVAC and electricity, then I am decreasing the value that those 10 paying students receive.
  
  In other words, they are still paying $20,000 — but only getting an education that is worth $17,500. It’s like the half gallon (4 pints) of ice cream now only being 3 pints, and there is a term for this: “shrinkflation.”
  
  Reply
  1. Frank
    
    March 31, 2025
    
    You must distinguish between average and marginal cost. Reduced tuition and children’s movie ticket prices are above marginal cost. The consumers are making different contributions to fixed cost or average cost. In any case, such price discrimination increases custom. If enforcement costs are not too high, it’s a great thing.
Jonathan

March 27, 2025

This is just absurd. Foreign students are not driving up tuition for Americans. They are subsidizing Americans if they are paying the full American tuition. Again, they are subsidizing the Americans, often massively. The typical American STEM graduate student is supported with a stipend + free tuition. In return, they typically provide labor as a teaching assistant at the beginning, and later as a research assistant. They are typically not paying any tuition at all! When I was in this situation, as a graduate student, I thought it was a great deal. Except for stress, I thought it was the time of my life.

Once again, whatever the foreign graduate students are doing, they are not pricing Americans out of the graduate education market. This article is so badly informed, it is embarrassing.

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1. Jared Gould
  
  March 28, 2025
  
  Did you not look at the sources I provided? “A 2020 paper indicates that public schools lean on foreign enrollment when the budget is tight, suggesting that foreign students pay more than domestic.8 This has presumably caused average net tuition to rise due to the composition effect of switching from lower-price domestic students to higher-price foreign ones”
  
  Undoubtedly, foreign enrollment has spiked tuition costs.
  
  Reply
  1. Dr. Ed
    
    March 28, 2025
    
    “Undoubtedly, foreign enrollment has spiked tuition costs.”
    
    Go look at what then-ED Secretary Bill Bennett was saying about the then-new middle class student loans in the ’80s — and he was right. That available money is what really inflated college prices.
    
    The late John Silbur (of BU) used to make a very important point — do not confuse “price” with “cost” when discussing higher education.
  2. Jared Gould
    
    March 28, 2025
    
    That makes a lot of sense. Yes, the price is high, way higher than the actual costs of running the intuitions.
  3. Jonathan
    
    March 28, 2025
    
    And it is undoubtedly the case that the high foreign tuition is net subsidizing the Americans, on average.
    
    Get a job with a budget director, you will see.
  4. Jared Gould
    
    March 28, 2025
    
    Please provide a source on this and I will look into it.
  5. Jonathan
    
    March 28, 2025
    
    Jared Gould, OK for quick starters google
    
    and some sources pop right up on my phone including first,yetthe AI Overview.
    
    What I claim is just common knowledge e.g. the mid level “flagship” R1 U. where they seek high paying intl and out of staters willing to pay out of state tuition.
    
    It is not even keeping good in- staters out. It is keeping staff paid and “discounts” aka scholarships high for in staters.
    
    Other circumstances vary, e.g. Ivy League, Berkeley, MIT, graduate vs undergrad, engineering vs science, etc. etc.
    
    But as for STEM I don’t think competitive domestic students are kept out.
    
    What does keep them out is that there is too much money to be made in other fields if you have sci/math brains.
    
    Look at the top billionaires as one kind of example.
  6. Dr. Ed
    
    March 30, 2025
    
    ” “A 2020 paper indicates that public schools lean on foreign enrollment when the budget is tight, suggesting that foreign students pay more than domestic”[emphasis added]
    
    This can be the end result for public IHEs, but it is way, WAY more complicated than this, and remember that public IHE funding includes a discretionary allocation by a legislature.
    
    1: Headcount. There are two types — actual and FTE (Full Time Equivalent) which is how many students you would have if you only had full time students. Legislatures look at headcounts when they are determining how much money to allocate and there is a relationship between how many students you have and how much they give you. The same thing is true when the state is considering closing campi, as has happened in several states.
    
    For example, the flagship University of Maine (Orono) is located 10 miles north of Bangor, in the geographic center of a state where most of the young people live 150 miles to the south. So they are actually discounting out of state tuition to fill seats so that they can meet the underwriting requirements of bonds they have issued.
    
    2: Distinguish between graduate (who often get tuition waivers) and undergraduate (who usually don’t). Bringing in a lot of UNDERgraduate foreign students well might produce a lot of actual tuition revenue and that may well be where the visa issue is arising. I don’t know because I am more familiar with GRADUATE students, and that’s what people usually think about.
    
    3: Tuition discounting and cost shifting. State universities have budget line items where money can only be used for certain things. There are lots of accounting games that can be played when you charge a student for tuition and then bring the money to pay that tuition from a different budget line. Usually this is done to (illegally) reduce the tuition you charge minority students.
    
    State universities are political entities which means that no one really wants to audit them, and I suspect that a true stem to stern audit of any of them would be quite “interesting.”
    
    4: Graduate tuition: First, let’s take real figures from UMass Amherst (2024-2025)
    Massachusetts resident: $2,581.50 if taking 1 credit, $8,705.00 if taking 9 credits (full time)
    Foreign student: $4,824.00 if taking 1 credit, $17,863.00 if taking 9 credits.
    
    So you get twice as much money on paper (and can put it into that accounting column) but how do you account for the tuition waiver that the foreign students inevitably get?
    
    One way would be to charge the grant that is funding the stipend. Hence instead of paying just the $40,000 stipend, also charge it $35,726 for the waiver. This is a direct cost which thus also serves to inflate the indirect cost figure.
    
    Even if you don’t do that, there are a lot of accounting games you can play when you count it as “lost revenue.”
    
    But on the graduate student level, American students are subsidizing foreign students.
2. Dr. Ed
  
  March 28, 2025
  
  ” The typical American STEM graduate student is supported with a stipend + free tuition.”
  
  The typical American STEM graduate student is foreign born.
  There are *very* few STEM graduate students who speak English as their first language.
  
  For some reason, the Federal law requiring that Americans be hired before foreigners can be doesn’t apply to higher education stipends.
  
  “They are typically not paying any tuition at all! When I was in this situation, as a graduate student, I thought it was a great deal.”
  
  And when I was a graduate student, it was quite clear that White Males Need Not Apply for assistantships — and I thought this was a rather raw deal. Still do.
  
  “whatever the foreign graduate students are doing, they are not pricing Americans out of the graduate education market.”
  
  REALLY????
  
  All the other White Males in my grad program dropped out.
  
  Reply
3. Dr. Ed
  
  March 28, 2025
  
  OK Jonathan, I will use UMass accounting because I am familiar with it.
  
  A foreign student gets a tuition and fee waiver.
  The tuition is considered “lost income” and written off.
  The fees have to be paid by the hiring department, along with the salary.
  (The hiring department then specifies which of its lines, e.g. a specific grant.)
  
  Now how, exactly, is the university enjoying any income from this foreign student?
  
  On the undergrad level, maybe, but you’d have to look at both cost shifting and tuition discounting.
  
  Jonathan, remember that cost and price are not the same thing — and there is an incredible amount of cost shifting. For example, to pay for UMass’ new $12.5M police station, every department on campus was assessed a per square foot “police protection” charge. Thus you have E&G funds going to pay for a police station which E&G funds couldn’t directly do. Every student is charged a few hundred dollars a year to subsidize the athletic department. Etc.
  
  When almost all foreign students get tuition waivers, I don’t see any revenue being present, let alone it subsidizing American students (most of whom don’t get waivers).
  
  Reply
Dr. Ed

March 27, 2025

“In 2023 … U.S. computer science doctoral programs admitted about 3,400 new students, 63% of whom were foreign”

And how many Americans were not admitted? No one ever mentions that…

” stipends … typically pay less than $40,000 annually.”

First, this is $40,000 for only half time (20 hours/week) for only 9 months.
That’s $80,000 for full time and only 9 months, 20,667 a quarter —
$82,668.

Second, stipends in competitive fields can be and often are more — a $50,000 would not surprise me, and that then becomes $100,000 full time for 9 months, $133,333 a year based on full time year long employment. And that’s market rate for similar full time, full year employment outside of the academy.

Third, this is exempt from the 7.65% FICA (Social Security/Medicare) tax, which on $50,000 would be $3,825.

Fourth, there are the benefits which typically include:
(a) Full tuition and fee waiver — this alone can be well into the five figures and where it would be considered taxable income were an employer to provide it, it is *not* taxable because it is a stipend.
(b) An almost entirely paid individual and spouse/dependent health insurance plan — UMass pays 95% of both which is typical. Often free dental & vision insurance.
(c) Parking discounts and preferable parking assignment (faculty & staff status).
parking discounts
(c) Paid time off for vacations, illness, and personal reasons.
(d) Faculty status for discounts on computers, software, and other things.
(e) An opportunity to go to conferences for free, and to co-author papers, and otherwise enhance one’s CV.

The opportunity cost of pursuing a doctorate is, thus, up to $100,000 per year.

Not really because there is nothing preventing you from private employment on the side and during the 3 months when you are off contract. A non-deductible low copay insurance plan ain’t cheap, and you’re getting that nearly free.

If you have a $50,000 stipend and receive a $50,000 tuition/fee waiver, you are only paying taxes on $50,000 — $7,841 in Federal Income Tax. But if you have to pay tax on that $50,000 waiver and hence pay taxes on $100,000, you pay $21,419 in Income Tax even though you only earned the same $50,000 in actual cash.

Now if you make $150,000 and pay the $50,000 out of your own pocket, then you pay $37,013 in Income Tax. Assuming that the degree itself has value, one then has to calculate that into the mix.

And obtaining a doctorate typically takes six years.

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