Association for Public Policy Analysis & Management

Over the past ten years, the United States experienced a dramatic increase in the number of foreign students at undergraduate programs. Using data from the 2001-2013 Integrated Postsecondary Education Data System (IPEDS) and the College ScoreCard, this paper examines the impacts of the influx of new foreign undergraduates on the U.S. higher education sector. To address the endogeneity of the influx of foreign students, I use exogenous factors (changes in visa policy and exchange rate policy) driving the large inflow of Chinese students since 2006, in combination with variation in historical levels of foreign students as instruments to predict enrollment patterns. I find a significant crowdout effect between the enrollment of foreign students and the enrollment of domestic students at American research universities with higher rankings, with the point estimate close to negative one. The capacity constraints appear to explain the crowdout effect and make American institutions increase their admission standards. I also find that admitting more foreign students has little impact on fees in both public and private research universities, but it does increase tuition charged by public research universities. The economic gains of enrolling foreign students allow American universities to increase the average amount of institutional grant aid for their accepted students as well as the average salaries for their instructional staff. Moreover, the empirical results provide some suggestive evidence that domestic students take out less debt as a result.