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As thousands of Indians scramble to get loans to study at American universities, starting September, should they be taking the risk?

Since the 2008-2009 recession, American universities have sharply reduced the number and value of financial grants offered to graduate students. This is because most of them, especially the state-run and smaller private universities, face repeated budget cuts and all of them face cuts in government research funds. Meanwhile the costs have risen rapidly due to faculty and staff hires and construction of new buildings and other facilities.

American universities are seeking to raise revenues in part by enrolling more students for Master’s degrees as well as offering several new programs. New York University, for instance, offers over a hundred Master’s degrees and certifications. Its business school offers over a dozen more programs, in addition to an MBA. The main criteria for admission, especially to the esoteric programs at the major universities and for most programs at the lower quality universities, is the ability to pay the full costs.

Universities do not offer financial aid that covers the total costs because they do not have the funds and since there is big demand for advanced degrees from foreign students. For instance, during the 2015-16 academic year, foreigners accounted for nearly 80% of the 2,868 students in the Master’s programs at New York University’s Tandon School of Engineering. The school’s fees and costs total over $90,000 a year.

Instead of sizeable financial aid, many American universities offer teaser scholarships to several students. These are viewed as marketing discounts by students since they cover only about 10% of the total costs. Yet some students feel honored to be awarded a scholarship, especially by the major universities. If they are not from wealthy families, they take on large educational loans to pay for the remaining 90% of the fees and costs. Students pursuing degrees in science, technology, engineering and math assume they have a safety option. They could find jobs in America for up to 29 months under practical training visas. Such jobs, they reason, will enable them to repay a big part of their educational loan. But Indian students face rising competition for practical training as well as skilled-worker visas from other foreigners, especially the Chinese and South Koreans.

More importantly since 2017, under President Donald Trump’s “Buy American, Hire American” policies, fewer companies in America are hiring foreign graduates on practical training and skilled worker visas. Also, more applicants for both visas are being rejected by the Immigration and other government departments. In 2017, for instance, only six of 41 applicants got skilled worker visas in a New York City program to create jobs by sponsoring foreign entrepreneurs. And work visas issued to spouses of H-1B skilled visa holders are being cut. Trump’s administration plans to soon eliminate the spousal and entrepreneur visas. Several Democratic lawmakers support President Trump’s skilled visa restrictions. One proposed legislation seeks to specifically restrict visas for engineers and other highly-skilled workers from India.

The new visa policies will hurt Indians pursuing advanced degrees in America, including those studying engineering, math, technology and science programs. The prospects are far worse for thousands of Indians studying business, economics, international affairs and other social science courses at American universities. Far fewer of them get any financial aid from the universities and so their educational loans are larger. Their practical training visas last for only a year, assuming they can find a job. So even an MBA from a top school takes on a big risk by funding education through a bank loan.

In 2018, for instance, a student enrolled for the two year MBA at Columbia University in New York will incur about $216,000 in total costs, including $144,000 for tuition fees. The median annual salary offered to 2017 Columbia MBA graduates was $146,000. So assuming students from India get an American work visa and a job which pays them around the median salary – both very big assumptions – it will take them at least ten years to repay their education loans. In 2017, six percent or more of the MBAs from Columbia, Northwestern, New York, Virginia, Vanderbilt, Indiana and Emory universities had no job offers three months after their graduation. Most of them were likely Indians and other foreign students. Indians returning to India, with American MBAs, will take 20 years or more to repay the loans.

Unlike the politicians, many college officials are sharply critical of the new immigration policies, saying they will shrink the pipeline supplying skilled foreigners from American colleges to power its technology and other businesses. MIT, Stanford, Carnegie Mellon and 13 other universities, including all eight Ivy League colleges, have jointly taken legal actions opposing some of Trump’s immigration policies.

The pleas of the universities are being ignored. Meanwhile, Indians considering taking on big loans to study in America will likely benefit from following the example of some risk-averse Indian students. They are not taking on bank loans, using their family home as collateral, to study in America. Instead they are seeking admission to Canadian universities, where costs are lower and prospects for work and permanent resident visas are far greater. Or they work for a company in India that may transfer them abroad.

Extract from “Passage from India to America: Billionaire Engineers, Extremist Politics & Advantage to Canada & China.” With permission from Bryant Park Publishers New York.

Ignatius Chithelen is manager of Banyan Tree Capital in New York. Earlier he was an analyst, fund manager at First Eagle (SoGen) funds, and reporter.

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