DALLAS – As colleges and universities grow increasingly dependent on tuition revenue, highly sought international enrollment is flat or falling in some regions, according to recent studies.

In Texas and other states in the Southwest, the loss of international students is particularly noticeable.

At the University of Texas at Dallas, where international enrollments have accounted for about a third of student growth in recent years, applications from abroad dropped by about 6% in 2017, school officials said.

The University of Texas Rio Grande Valley reported a 14% decline while Texas A&M University at Commerce saw a 22% drop and Lamar University in Beaumont reported a 37% reduction.

In a report Monday, Moody’s Investors Service said the falling enrollment has become a recognizable credit factor.

“We expect that weaker enrollment will lead to a continued rise in international student tuition discounting, which will constrain net tuition revenue,” Moody’s analyst Benjamin Howard-Cooper wrote. “Universities with more diversified enrollment across countries are less vulnerable to declines in demand from any single country.”

Some colleges and universities in the Northeast and in California are actually showing increased international enrollment as those in the Midwest and South are seeing declines, according to the International Education Exchange’s “Open Door’s” report.

“While the overall number of international students studying in the United States has increased, the number of new international students -- those enrolled at a U.S. institution for the first time in fall 2016, declined by nearly 10,000 students to about 291,000, a 3% decrease from the previous year,” the report noted. “This is the first time that these numbers have declined in the twelve years since Open Doors has reported new enrollments.”

Factors slowing growth include a mix of global and local economic conditions, and in some cases expanded higher education opportunities at home and declining populations, according to the report. The scaling back of large Saudi and Brazil government scholarship programs was a significant factor, as the number of students from those two countries showed the biggest decreases, particularly in non-degree study. Texas and other energy states were particularly affected, according to Moody’s.

“Because these are oil and gas producing regions, they had a larger proportion of students from the Middle East studying,” said Susan Fitzgerald, associate managing director on Moody’s higher education team. “In particular, some have been harder hit by changes to Saudi Arabia’s King Abdullah scholarship program.”

The slowing international enrollment comes amid decreasing state financial support for public colleges and universities. States’ financial support for higher education grew only 1.6% between the 2017 and 2018 fiscal years, with more than a third of states decreasing their funding and another dozen increasing it only slightly, according to the annual Grapevine survey released last month by Illinois State University’s Center for the Study of Education Policy and the State Higher Education Executive Officers Association.

The 1.6% increase was down sharply from a 4.2% rise last year and represents the lowest annual growth in the last five years, the report said.

The slowing of international applications also coincides with the Trump Administration’s plans to end President Obama’s Deferred Action for Childhood Arrivals, which shielded from deportation non-citizens who were brought to the United States as children.

Based on 2014 census data, 365,000 high school students across the United States were eligible for DACA status, and another 241,000 DACA-eligible students were enrolled in college, according to the Migration Policy Institute. Together, that’s roughly half, or 51%, of the DACA-eligible population of nearly 1.2 million.

Trump canceled DACA last September, but the protection has continued under court orders and efforts by Democrats in Congress to reform immigration law. Trump said he will not sign any immigration bill unless Congress approves $25 billion for a wall on the U.S. Mexico border. An estimated 535,600 people would lose their DACA permit between March and September 2019 unless the program is extended by Congress and approved by Trump.

Nationally, more than one million international students studying at U.S. colleges and universities contributed $36.9 billion and supported more than 450,000 jobs to the U.S. economy during the 2016-2017 academic year, according to NAFSA: Association of International Educators. The figures represented a 12.4% increase in job support and creation and a 12.5% increase in dollars contributed to the economy from the previous academic year.

In 2017, 10 states broke the $1 billion mark in contributions from international students. California, New York, Massachusetts, Texas and Pennsylvania saw the largest benefits, the study said.

While the pool of international students has doubled over the past 15 years, the U.S. market share is down by 3%, according to Project Atlas data. The growth rate of students choosing to study in the United States decreased by nearly half from the previous year.

The international trend comes amid a negative outlook for higher education by S&P Global Ratings.

“While institutions at either end of the higher education selectivity spectrum (that is, the most elite and the most open-access) continue to see increasing applications and enrollment, those in the middle struggle more and more to establish and communicate their value proposition to potential students and parents, who themselves labor to understand the comparative value of the education their student receives versus the price they pay,” analyst Jessica Matsumori wrote.

Higher education also faces negative effects from congressional tax reform and constraints in the capital market, according to S&P.

The 2017 tax legislation enacts a 1.4% tax on investment earnings for private colleges and universities with more than $500,000 of assets per student.

“Although the limit on charitable contributions has been increased to 60% of adjusted gross income, which may promote some additional individual giving, this is offset by the increase in the standard deduction, which we believe would do more to reduce the appeal of the use of the charitable contribution deduction,” Matsumori wrote.

“If the cap on the state and local tax deduction puts additional pressure on state budgets, there could be a trickle-down negative impact to the support of public colleges and universities, including possible reductions to operating or capital appropriations,” she added.

Despite those headwinds, Fitch Ratings has a stable outlook on the sector.

"Operating revenue pressures will likely intensify for small, tuition-dependent schools in demographically declining areas or highly competitive regions," said Fitch director Emily Wadhwani. "Barring those outliers, operating performance is expected to remain strong sectorwide, which coupled with steady student demand and enrollment and solid financial resources supports a stable sector outlook.”

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