Returns for educating students offshore ‘derisory’, says study

Teaching international students in the UK is “20 times more lucrative” than educating them overseas using local partners, says the author of a study into the “derisory” profit margins made by many British universities on transnational courses.

In the very first survey of the profitability of UK tertiary-level courses taken by about 700,000 students overseas each year, Paul Bennell, an independent higher education consultant, obtained data from 32 UK universities on the costs and expenditures related to different types of courses that they operated.

Annual net returns per student varied massively depending on the course, subject and institution – some universities generated as little as £36 per student on some courses, while one institution saw a profit of £1,200 per pupil on its courses, the study found.

The least profitable form of overseas provision involved the validation by UK universities of courses taught by local partners – a low-cost, low-input model in which institutions in essence “rent” their courses to foreign providers, said Dr Bennell, a former academic at the University of Sussex’s Institute for Development Studies.

The median surplus for these overseas partnerships was £271 per student in 2015-16, while the surplus was less than £200 at more than a third of universities. Only 18 per cent of institutions earned more than £500 per student annually from these arrangements, the report says.

“When you compare these low returns with the profits that universities make when they bring international students to their own campuses, they are derisory,” Dr Bennell told Times Higher Education.

“Many universities are charging international students £15,000 a year and most of this is profit, whereas the margins for overseas activity are very fine,” he added, saying that teaching international students in the UK is “20 times more lucrative than franchising or validating courses”.

Targeting overseas students with online courses was generally more profitable, with half of the 14 providers that submitted information returning a surplus of more than £1,000 per student, although several said that this activity was now loss-making.

Only seven UK universities submitted information on the profitability of their overseas campuses, with most of the 89 institutions surveyed refusing to publish information for commercial reasons. Three said that they generated a surplus in excess of £1,000 per student, and four reported that net returns were less than £500 per head.

“Some of the low returns should force universities to ask whether the game is worth the candle, particularly given the risks of reputational damage and huge resources committed to these initiatives,” said Dr Bennell.

“There are some very lucrative courses, but many universities went into this area because of unsubstantiated optimism, and the year-on-year exponential growth they expected has not materialised.”

The rise of for-profit online providers meant that universities had to commit significant resources if they wanted to compete in this area, thereby exposing them to large potential losses, Dr Bennell added. “You cannot just dabble in it any more,” he explained.

That said, if universities are able to bring cohorts studying their courses abroad to the UK for year-long placements (about 22,000 students did this in 2016-17), they may see some benefit in establishing low-yield partnerships, Dr Bennell said.

“While the numbers look impressive for offshore students, it is worth remembering how little money there is in many of these courses,” he added.

jack.grove@timeshighereducation.com