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Committee on Financial Services

United States House of Representatives

Archive Press Releases

February 11, 1998


Honorable Jim Leach
Committee on Banking and Financial Services
United States House of Representatives
2129 Rayburn House Office Building
Washington, DC 20515-6050

Dear Mr. Chairman:

On behalf of NAFSA: Association of International Educators, I would like to thank Chairman Leach and the House Banking and Financial Services Committee for the opportunity to submit written testimony for the record on the effects of the East Asian financial crisis on international higher educational exchange in the United States.

I serve as Director of the Office of International Students and Scholars at the University of Iowa, which advises and counsels foreign students and scholars on matters ranging from maintaining lawful immigration status to cultural adjustment and interacting constructively with Americans. I also currently serve as the President of NAFSA, the largest professional association in the country representing individuals who work directly with foreign students and scholars. With a membership of over 2,000 academic institutions and 8,100 individuals involved in international educational exchange, we have a great interest in the welfare of the thousands of visitors to our campuses from Asia. As such, we are very concerned with the present financial crisis in East Asia as it almost certainly will adversely affect the flow of students and scholars to the United States.

The export of services from our institutions of higher education, regarded as among the best in the world, represents the fifth leading service export of the United States. International educational exchange brings in approximately eight billion dollars in trade surplus. For academic institutions and local communities this can be a substantial impact on local and state economies. Over half of the nearly 458,000 foreign students in this country come from Asia. Further, over 77,500 of this number come from Indonesia, Malaysia, Thailand, and South Korea - the four countries hit hardest by the current financial crisis in East Asia. Thus, the presence of these students and scholars from the region account for a significant proportion of the total economic contribution of educational exchange to the U.S. economy. Furthermore, these students and scholars represent countries that are of considerable academic interest to many on our campuses, because of their large populations, distinctive cultures and histories, and/or their past or potential economic, political, and social influence in the world.

As a result of the run on banks in East Asia and the subsequent devaluation of currencies, students and scholars from these countries are finding it increasingly difficult to finance their academic experiences in the U.S. Business failures, stock market drops, and bank closings mean that families and other sponsors are rapidly losing savings with which East Asian students use to pay the costs of their education on our campuses. These costs include tuition, room and board, and other living expenses. Further, with the currencies of these countries losing as much as 84% of their value against the dollar, as in the case of Indonesia’s rupiah, the real costs of an educational experience become dramatically more expensive.

While more than two-thirds of all foreign students receive the majority of their financial support from their families, a significant portion are sponsored through their home governments. At the present time, members of our Association do not report instances where governments are cutting off funding for current students. However, some governments, most notably Thailand, have already frozen or are considering freezing funding for future students. In addition, some students already in the U.S. may be forced to leave due to austerity measures imposed by the International Monetary Fund. Should governments be forced to cut back on their study abroad programs, the United States’ position as the leading destination of foreign students and scholars may be threatened.

The current crisis is causing the East Asian student and scholar population on our campuses to worry about whether they can complete their programs. In order to maintain lawful nonimmigrant status, students must be enrolled full-time. While American students who might also face financial difficulties may have the option to attend school on a part-time basis, or take a semester off to work, foreign students do not have such recourse. For a foreign student to take a semester off to work, he or she must return to the home country. Many will not be able to come back to complete their programs. We have reports that some students have already decided to leave part way through their courses of study.

When this happens, student enrollments drop and so do tuition and fees collected by the schools. In some cases, the higher out-of-state tuition that foreign students pay subsidizes university programs and educational opportunities for U.S. students. On the surface, therefore, the East Asian financial crisis may affect only those students from those countries, but the reality is that the current situation may eventually adversely affect

American students as well. For foreign faculty and researchers sponsored by their home governments, funding for their exchange may be frozen or delayed. The result of this is that universities may be forced to postpone or halt important research projects.

Here at the University of Iowa, about 325 students and additional 40 visiting scholars come from the countries affected by the currency crisis in Asia. Many of the students report that they will be unable to pay their tuition according to the usual spring semester schedule for doing so. The university is acting to accommodate these delays, but of course cannot do so indefinitely. Enrollment in our Intensive English Program has fallen; students from the affected countries have said they can no longer afford to attend. Area businesses will also be affected by this, as students and scholars have less income for their living expenses. If these 325 students were forced to leave the University of Iowa, the university would lose more than $2,860,000 just from tuition and fees alone, not to mention the lost contribution from other living expenses to the local economy.

Recent press accounts attest to the growing problems that foreign students from Indonesia, South Korea, Malaysia, and Thailand face in light of the financial crisis in their home countries. The January 19 edition of the Washington Post noted that "the devaluation of several currencies, the collapse of businesses, and massive stock market losses have made it difficult for many Asian families to continue supporting their children’s education in the United States." Cable News Network (CNN) noted the uniqueness of the situation facing these students, reporting on January 13 that "international students can’t cut costs by dropping courses or taking a semester off because their student visas require them to attend classes full-time." A January 27 report on National Public Radio (NPR) indicated that situation in East Asia will almost certainly have long-term consequences as new students will be unable to come to the U.S. Indeed, the field of international education on U.S. campuses have never seen so wide an impact of home country economies on their students studying here.

Universities are finding creative solutions to these problems, such as tuition deferments, special loan funds, and installment plans. However, these measures will probably only aid a small percentage of current students. More importantly, payment plans will do nothing to buttress the ability of the U.S. higher education community to attract promising new students and scholars to this country. Herein lies the real threat to international higher educational exchange and its positive impacts on institutions, local and national economies, and the exchange of ideas.

To many people, the situation in East Asia may seem far away and unlikely to affect us here in the U.S. However, the academic community is already seeing the affects of the "Asian contagion" on our campuses. While for some the situation is the concern only of economists and government leaders, for the international educational exchange community this is a very human story. Therefore, NAFSA believes that where appropriate, the United States should provide the leadership necessary to ensure that the crisis in East Asia does not spread elsewhere to Asia and to the United States. The Association supports Congressional efforts to stabilize the region, in the form of financial assistance and support of institutional reforms as needed. Unless we address the crisis

soon, the present financial situation could spread to China, Taiwan, Japan, and ultimately, to all of Asia. The consequences of such an economic crisis on the entire Asian student and scholar population in the United States would ultimately threaten our position as the world leader in higher education for a long time to come.

On behalf of NAFSA, I appreciate the opportunity to express the views of the Association on the Asian financial crisis. I further wish to thank Chairman Leach and the House Banking Committee for their role in addressing this very important concern to the overall economic health of the United States, as well as the international higher education community.




Gary Althen
Office of International Students and Scholars
University of Iowa
Iowa City, IA

NAFSA: Association of International Educators
Washington, DC


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