Until Covid came along, international students were pouring billions into our schools, polytechs and universities. Can the sector recover, and do we want it to?
Last year, the education sector's biggest source of private funds began to dry up. For two decades, the sector had depended on an influx of more than 100,000 international students each year to help pay its bills.
When the borders closed, it looked as though that income would be wiped out. More than 1000 staff lost their jobs and some courses and private providers shut down. Parts of the sector have since bounced back better than expected, but the upheaval has nevertheless raised questions about the risks involved, and its sustainability.
The Government claims that, although overseas students bring enormous benefits, there are costs. It worries that if the sector faces another collapse in future, taxpayers might have to foot the bill. It also believes some international students see the opportunity to attend institutions in New Zealand "as a guaranteed path to residence", adding fuel to the fire of the housing crisis and putting pressure on the labour market. A shake-up – which could even see the scheme scrapped for primary and intermediate schools, and new visa rules introduced – may be on the cards.
Others question whether we should be profiting from international education at all, given the many cases of poor-quality courses and student exploitation that some claim are putting our international reputation at risk.
The Colombo Plan
When foreign students first arrived here in the 1950s, they were actually paid to come and study. This was under the Colombo Plan, an international scheme developed to use education as a means to train the future leaders of the developing world and to spread capitalism and democracy to keep communism at bay.
"They were basically trying to work out ways to ensure the developing world was more aligned to Western democracy," says Stephanie Doyle, who lectures in international education at Victoria University of Wellington. "A lot of New Zealand's early Colombo Plan students went on to leading positions in their countries and there was quite a notion of building up enduring relationships between these countries."
Only a handful of students came at first, rising to just under 1000 in the 1960s – mostly from Malaysia and Myanmar. Private international students also soon arrived, but they only paid domestic fees and came in their hundreds, not thousands.
Public education at the time was, as the late Massey University education professor John Codd wrote, "based on the communitarian ideals of egalitarianism and social welfare". International teaching wasn't a source of revenue, but a way to build relationships with other countries and to help those from poorer countries gain skills.
That changed in the 1980s when, according to Codd, there was "rapid commercialisation of New Zealand's public education system". Schools, universities and polytechs were reorganised to operate more like businesses, reliant on their students for funding and, for the first time, they were able to determine their own fees for international students.
International fees were set at roughly double domestic student fees and became a significant revenue source. By the 1990s, public education had become a "globally marketable commodity" and a marketing organisation, International Education Ltd, was set up to sell New Zealand education to the world. A new export industry was born.
Boom and bust
Within a few years, student numbers were increasing at a rate of almost 50% a year. In 1996, there were just under 5000 tertiary international students, but within six years the number increased to more than 30,000. Schools and private providers jumped on the bandwagon, and the sector as a whole reached an all-time high in 2002. Nearly half came from China.
By 2004, schools had become "highly dependent" on this income. Some state schools were getting more than $1 million a year in international fees and, in 2004, revenue from foreigners began to outstrip fees paid by domestic students at half of the country's universities.
Auckland University of Technology pro vice chancellor John Raine was pro vice-chancellor of international education at the University of Canterbury between 1999 and 2004 and at Massey University until 2009. Universities became increasingly reliant on international students to balance the books, he recalls.
"Our revenue wasn't actually keeping up," says Raine. "The government funding per domestic student in real terms was tending to go down and that meant there was increasing pressure on the universities to substitute that revenue in other ways. So the international business, which grew very strongly from the late 90s, was a godsend … but the universities did indeed become dependent upon that international student business."
Between 1999 and 2002, the number of international students at Canterbury grew from about 400 to 2200. "It was quite a challenge because we were trying to attract international students to ensure we'd meet revenue targets, but at the same time we'd be recognising that this was a very significant operational risk."
Then the market collapsed. Between 2003 and 2007, international student numbers dropped by a quarter and revenue from fees fell 20%. The decline was almost entirely due to the flight of Chinese students following bad publicity about the quality of courses, and pastoral-care issues.
A couple of high-profile English language institutes – Modern Age Institute of Learning and Carich Training Centre – went bust. Then-Education Minister Trevor Mallard reportedly made a special trip to China to smooth over relations, but the damage was done. Enrolments from China plummeted and the number of international students remained flat for almost a decade.
Another boom followed and, by 2016, the number of students again peaked at about 130,000 – only for there to be another bust – once more thanks to ongoing controversies over the quality of private providers. Visa rules were tightened and several language schools were closed down.
Through all this, schools and universities managed to distance themselves from such issues, and their international rolls continued to grow. By 2019, the number of international university students was at a 15-year high of 28,150, and international school-student numbers were the highest on record at 22,895.
Universities were bringing in $580 million in international fees – a figure that had doubled in a decade. In total, international education fees hit $1.2 billion, and indirect benefits from student spending and related employment were touted to be worth $5.23 billion to the economy, making it our fifth-highest export earner.
The Covid crisis
When New Zealand closed its borders to China in February 2020, it was just weeks before thousands of students were due to arrive to begin a new semester. "It came at the absolute worst possible time," says Chris Whelan, chief executive of Universities New Zealand.
By March 2020, the borders were closed to all students, and by June, universities were facing a financial hole of about $400 million. The sector began pleading for international students to be allowed to return, but a reprieve never came. As the first semester of 2021 began, an estimated 700 university staff lost their jobs, including 300 at the University of Auckland.
"This time last year we were very pessimistic," Whelan says. "We expected a third of the students to leave after graduation with no new intake to take their place."
About 1000 students who needed to finish their degrees were eventually given permission to return. With MIQ clogged, only about 135 made it through. But the carnage wasn't nearly as bad as expected.
Overall, international enrolments at universities were down only 23% in 2020. At the University of Auckland, the number of full-time-equivalent international students was down just 5%, and international-student-fee revenue was down just 1.24%. The university will pay a $7 million cash bonus to staff after recording a surprise surplus last year.
At AUT, international enrolments and revenue were down 6.3% and 4.5% respectively, while at Canterbury, international student numbers fell 9%.
2021 was expected to be much worse, but no crash came. About a third of students continued studying remotely from overseas, and many students who were expected to leave instead chose to stay here, Whelan says.
"A lot of students continued studying because we were seen as a safe haven. So rather than going home at the end of the three-year bachelor's degree, a lot more stuck through for the postgraduate."
The big saviour was a boom in domestic enrolments, which surged by 10% as Kiwis who would normally head overseas to study decided to stay at home. "We were expecting a disaster," says Whelan, "but most of it hasn't come to pass."
But student numbers are expected to fall in 2022 as more countries open up to the world and New Zealanders head overseas to study.
"It has pushed out some of the difficult financial challenges that we're going to have," says Whelan. "But the most sensible forecasts are still saying we should be looking at a deficit, if not next year then certainly for a few years after that, because we're not expecting international enrolments to return to anything like the scale they were pre-Covid."
Schools appear to have been hit harder, with international student numbers down more than a third to 14,840 last year, hitting revenue to the tune of about $40 million. About 1000 staff are estimated to have lost their jobs.
This year was much worse. "It has been devastating," says John van der Zwan, executive director of the Schools International Education Business Association (SIEBA).
Van der Zwan estimates student numbers dropped to about 5000 in 2021 and could halve again in 2022.
Some schools have been hit particularly hard. Overseas enrolments at Macleans College in Bucklands Beach, Auckland, shrank by two-thirds in 2020, from more than 300 to 90, at a loss of about $20,000 in fees per student.
"It's a large school, but that's a large chunk of operating funding that's heavily impacted," van der Zwan says. "Schools do this to earn money to put into additional staff, learning-support teachers, teacher aides and resources for Kiwi students. With that money drying up, schools have had to make changes and a lot of staff have lost their jobs."
Last year, the Government spent $20 million to help schools retain key staff who work directly with international students, but van der Zwan says the money was just in lieu of the wage subsidy.
"That did nothing for the loss of revenue."
A new lesson plan
With the sector in a state of upheaval, the Government is taking the opportunity for a "reset", alongside its immigration reset.
Cabinet papers and consultation documents show it's concerned institutions are too reliant on students from India and China and vulnerable to booms and busts. It also appears to be concerned that international education is being treated as a fast-track path for immigration. A June 2020 Cabinet paper notes "concerns about recruitment of students primarily motivated by work rights and pathways to residency, and providers focusing on volumes and revenues rather than education outcomes".
Another report says there is a risk student visas are "weakening the integrity of the immigration system" and creating pressure on the housing market, teacher supply and education capacity. It also raises concerns that international students are being exploited in the labour market and receive poor student support. To address these issues, it wants to review "key policy and regulatory settings to strengthen the system and the quality of education provision".
Inequities in international student revenues are another cause of concern. Education Minister Chris Hipkins told RNZ most foreign students were enrolled at high-decile schools, and lower-decile schools were missing out on the extra funding. An Auditor-General report showed decile 9 schools got an average $306,000 surplus from international fees, compared with $41,000 at decile 1 schools.
International education at primary and intermediate schools could end altogether, and visa changes could be in store for private training institutes and polytechs. The Government's "key priorities" for the reset include "considering the future of international education in primary and intermediate schools and ensuring work rights for international students are appropriate, particularly at the sub-degree level".
But it's not yet clear whether the Government wants to curb the number of international students overall. In a letter to the sector in May 2021, Hipkins suggests not: "I am less concerned about numbers of students than about the quality of the experience and education we can offer them, and the value they bring to our institutions and communities."
The Government has also signalled it wants to encourage more international students to study remotely.
In a statement to the Listener, Ministry of Education policy director Belinda Himiona said the ministry was still working to address the risks identified in the sector. However, Himiona ruled out regulating international student fees or changing how education institutions are funded to ensure they are less dependent on income from foreigners.
At the end of November, the Ministry of Education released a discussion document suggesting overseas students no longer be allowed to enrol below year 9. Consultation closes in March, but according to van der Zwan, such a move would be a disaster.
"I say that not from a business perspective, but from a cultural-value perspective. You don't have to go far to find a primary school that has foreign students that will tell you how wonderful they are, how much the Kiwi kids love having foreign students in their school and how much they add to the school. At a time when we're realising that inclusion and being engaged globally is so important, to remove that opportunity from primary schools just doesn't make any sense.
"Those schools that have foreign students are really going to fight to have that continue because having these people in those communities has such value."
Chris Whelan says concerns about students merely coming to climb the residency ladder is overstated. Most students who come to New Zealand return home after studying, he says, and those who stay and enter the workforce are highly educated and benefit the country.
"Close to 75% of international students go home within five years and the vast majority of those go home immediately after they finish their studies. Of those who stay on, 10 out of 11 are in a degree level of employment. They are accountants, lawyers, doctors giving value to the economy."
The vice-chancellor of the University of Auckland, Professor Dawn Freshwater, recently cast doubt on students returning in their previous numbers, citing ongoing concerns about climate change affecting attitudes to international travel. However, she also indicated that enrolments for 2022 were down "only slightly", due to the willingness of many overseas students to continue learning online.
Whelan says encouraging students to study from their home country won't work.
"What international students are really wanting is the experience of living, working and studying in an English-speaking country."
He also doesn't believe universities are too reliant on international student fees, or that this creates an unreasonable financial risk. "We've had two black-swan events in the past 30 years and the university sector has not had a government bailout for either of them because we manage the risk sensibly.
"We've generated about $15 billion of benefits for New Zealand and universities require less subsidy from taxpayers than they would otherwise and they can achieve economies of scale that would not be possible with just domestic students."
John Raine also says the benefits of international education far outweigh the costs.
"International students become ambassadors for New Zealand and help feed into sectors that need people with a high level of training here, and we won't get that with students studying remotely."
He says international students who stay on in the country also help boost wages by contributing to a high-tech economy.
"We shouldn't just be trying to boost wages by having a scarcity of employees available. We should be looking to grow our professional and high-tech sectors and they're crying out for workers."
However, others believe international education should return to its roots, offering a way to build links with other countries and cultures – not as a revenue stream for institutions.
Tertiary Education Union president Tina Smith says the Government's statements to date still suggest it's fixated on a commercial model for the sector, where students are "treated as dollar signs" to fill a public funding shortfall. She believes funding should increase so schools and universities don't have to depend on international students, and the students are welcomed into the country for the public benefits they provide.
"Covid didn't cause all the problems, it just highlighted some of the existing ones," Smith says. "The only way institutions have been able to survive, and how they've been encouraged to survive, is to keep recruiting international students to fill the funding shortfall. That hasn't always been done with priority of student experience or quality education at the forefront.
"But education is a social good that changes people's lives, it's not a commodity. The emphasis needs to be on building international relationships and making sure that we provide quality education and a quality experience for students."