US University is Buying Insurance To Prevent Revenue Loss As Chinese Student Numbers Drop

2 years ago



It’s no secret, the United States is making big bucks off of international students, Chinese ones being if not the most interested in getting US education. As told by Quartz, by 2015 “over 40% or 600K of student visas were issued to students from mainland China.” Over 4 years (between 2008 and 2012), Chinese students paid about $7B in tuition. Lately, Chinese families are feeling more reluctant to send their kids to study in USA. The Typical Student team tells you how US universities are treating the change.


Will Insurance Prevent The Loss Of Revenue for US Universities?




Source: Quartz



In 2015, the University of Illinois’s business school had about 51% of foreign students with almost 12% making up the student body. As US is limiting visas for international Chinese STEM students, the schools are looking for a way to protect themselves from the loss of revenue. For instance, Jeff Brown, the dean of the University of Illinois’s business school bought an insurance policy.


How Much Is The Insurance Coverage?



Source: Quartz


So, if there’s a 1/5 drop in revenue from Chinese students in a single year following “triggering events”, the university is getting a coverage of up to $60M. The “triggering events” include “a visa restriction, a pandemic, a trade war — something like that that was outside of our control.”


As told by Quartz, this is a smart move for the University of Illinois. However, an insurance “create moral hazard, and embolden universities to double down on Chinese students instead of finding ways to diversify their revenue.” Still, dean Brown believes that “hedging the risk” would  give them more confidence “to invest in the very strong relationships that we have in China.”


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