For generations, students from around the world have fueled universities in the United States, their top destination by far. Those students don't just sustain a $43 billion export industry in higher education services per year. Many remain after graduation as a key source of high-skill science and engineering workers, and thus innovation and growth in the US economy.
That system is now crumbling. The White House has enacted a spate of policies to restrict and repel international students en masse. This shift, if sustained, would hurt the US economy in many ways, according to a new PIIE Policy Brief, Class Dismissed: The Effect of International Student Exclusion on the US STEM Workforce and Economic Growth. I wrote the policy brief with Amy M. Nice and Jeremy Neufeld, based on a study commissioned by the National Academies of Sciences, Engineering, and Medicine.
Student exclusion is underway
Since early 2025, the Trump administration has ordered several actions to reduce the number of international students in the country. First, it demanded that universities limit enrollment by international students or face blocks on federal funding, and it banned the issuance of student visas to any nationals of 38 countries.
Second, US officials made it harder in several ways for international students to complete their courses of study and join the US workforce. They moved to cap student visas at fixed terms by ending the duration of status rule, confronting students with uncertain visa renewal conditions mid-program. Officials reweighted the H-1B skilled-worker visa lottery toward more experienced workers, lowering the chances for new graduates. And they instructed immigration officers to refuse student visa holders' adjustment to permanent residence in all but extraordinary cases.
This policy program has already slashed inflows of international students. Through September 2025, the United States issued about a third less F-1 student visas than has been typical in recent years, as shown in figure 1. Apart from 2020, during the pandemic, there is no comparable decline in recent years. The effects will deepen with time, though the government has declined to release more recent visa statistics at the time of writing.
This is not a side effect of US policy but an explicit goal. US vice president JD Vance describes international students collectively as "bad for the American dream, for a lot of kids who want to go to a nice university and can't because their spot was taken by a foreign student." The director of US Citizenship and Immigration Services, Joseph Edlow, has plainly stated that he would aim to make it "abundantly difficult" for foreign students "to continue to live and work in the United States." And students are getting the message. When we surveyed 1,039 current international students and postdoctoral fellows, mostly in science and engineering, on how their decisions would have been different if they had known in advance about these new and dramatic restrictions, about half responded that they would "probably" or "definitely" never have come in the first place.
The long-term cost to the US economy
These policies, if sustained, would constrict a key supply of science and engineering talent to the US economy, reducing productivity and slowing economic growth in the long run. Using imperfect but best-available estimates from the economics research literature, we project the loss produced by a sustained decline of one third in international student inflows. Over the course of a decade, real US GDP would be smaller than it would be otherwise—an annual loss, at current GDP, of between $240 billion and $481 billion. The annual loss would be comparable to erasing the entire economy of Wisconsin or South Carolina.
A number that large, driven by government policies aimed at students, invites skepticism. The effects on productivity are indirect, diffuse, and uncertain. Few Americans in 1976 could have guessed that Sanjay Mehrotra, who barely overcame three visa denials to come from India for a US engineering degree, would today lead a $1 trillion company. Long-term effects are, by nature, invisible on a given afternoon. But they are well-documented in economic research. We estimated those effects in three steps: from students to workers in high-skill occupations in science, technology, engineering, and mathematics (STEM), from the workforce to productivity, and from productivity to GDP.
Start with the workforce. Foreign-born workers account for 30 percent of all US STEM workers (see figure 2) and 49 percent of those whose highest degree is a PhD. A major slice arrived as international students: Workers who are both foreign and US-trained make up 19 percent of the entire high-skill STEM workforce and 35 percent at the PhD level. That pattern is no accident. The US immigration system has almost no channel for recruiting skilled workers directly from abroad; employment-based green cards go overwhelmingly to people already here, and the H-1B visa mostly retains rather than recruits workers. As one National Academies committee chair has observed, "the United States has a talent recruitment program; it's called graduate school."
Next, the effect of exclusion on that workforce. Suppose the inflow of foreign STEM graduates from US universities into the US labor force had been one third lower in every prior year, at the retention rates actually observed. Today's high-skill STEM workforce would be 6.2 percent smaller overall and 11.5 percent smaller at the PhD level. The calculation is mechanical but conservative in light of the research literature. Research has shown that foreign-trained STEM workers are very limited substitutes for the US-trained for employers' needs. Moreover, removing international students reduces STEM degree opportunities for native students at US universities by slashing their tuition revenue.
Last, productivity. The best available estimates find that each rise of 1 percentage point in high-skill foreign STEM workers' share of the US labor force raises annual growth in total factor productivity by 0.27 to 0.54 percentage point. Run that machinery in reverse: High-skill STEM workers are 4.7 percent of the US labor force, so cutting their numbers by 6.2 percent lowers their share by 0.29 percentage point. Annual productivity growth then falls by 0.08 to 0.16 percentage point. Compounded over 10 years, GDP ends the decade 0.79 to 1.57 percent smaller than it would otherwise be. Against the current $30.4 trillion US economy, that is $240 billion to $481 billion per year, a vast and permanent loss.
The estimate is conservative for at least three other reasons. First, it omits the direct losses to universities, associated firms, and college towns, which amount to tens of billions of dollars a year. Second, it assumes the one-third decline does not deepen. Many of the policies to restrict and deter international students took effect after September 2025 (though information about them had been trickling out earlier), so the cuts to student inflows in the figure above are likely to deepen. Third, restrictions on the ability of students to remain and contribute to the US economy will eventually reduce their willingness to come in the first place, particularly the most talented who have more options.
To be sure, the calculation also assumes that no other workers fill the gap. We test that assumption in the brief against the two candidate sources of replacement, and neither survives contact with the evidence. When the government greatly expanded employment for US-trained foreign graduates after 2008, workers petitioning from abroad were not crowded out of H-1B visas, so there is little reason to expect the reverse process to crowd them in. And the research on US-born students finds crowding out only at a handful of elite schools with fixed enrollment; across the higher education system, foreign students' tuition expands the programs available to everyone.
US lawmakers can fix this now
It is not too late. The US Congress can secure America's global talent pipeline at the four points where it now leaks. Lawmakers can guarantee that students keep their visa status for the length of the program they came to complete. They can write post-graduation work authorization into statute, as the Keep Innovators in America Act would do. They can rank H-1B applications by compensation rather than seniority, which would favor exactly the high-salary recent graduates the current rules penalize. And Congress can begin to clear the green card backlog for STEM graduates, as the FORTRESS Act would have done for PhDs in critical fields.
The United States built the world's most effective skilled-talent recruitment system without ever designing one: its universities. Current policy is dismantling that system at the entry point. The largest costs will not show up in next quarter's GDP release. They will compound slowly, as businesses never founded, cures never discovered, industrial leadership opportunities lost, and many other forgone benefits to America.
Data Disclosure
This publication does not include a replication package.
