The federal government needs to revisit its cap on international students after the policy significantly reduced Canadian colleges’ revenue and created conflict within the postsecondary education system, experts say.

The cap also has interfered with Canada’s need for temporary foreign workers, necessitating a trade-off between these workers versus international students, due to government immigration limits on all non-permanent residents, experts said in a podcast by the C. D. Howe Institute, hosted by Michael Hainsworth (photo at right).

Ottawa needs to overhaul both its immigration policy and international student program and decide what the strategic goals are and use measurable data to attract the best and brightest talented immigrants, they said.

“Ontario colleges lost a third of their income when international students disappeared,” said Alex Usher (photo at left), president of Toronto-based Higher Education Strategy Associates.

“My estimate is we’ve probably lost about 1,000 [college] programs in the last 12 months or so,” he said.

These programs were so targeted to the international market that when the number of international students fell dramatically there was no reason to offer the programs anymore, Usher said.

The federal government implemented the first-ever cap on international student study permits in January 2024, a temporary two-year cap that set an initial target of about 360,000 approved permits for 2034 – representing a 35-percent decrease from 2023.

The government also tightened eligibility for the Spousal Open Work Permit, limiting it to spouses of master’s and doctoral students.

Along with Ontario colleges, colleges elsewhere in Canada also have been hit by the change in federal policy and also have needed to impose layoffs and cut programs in the face of financial deficits.

The federal cap on international students requires provincial governments to allocate how many students under the cap are going to be allowed in specific colleges, said Mikal Skuterud (photo at right), fellow-in-residence at the C. D. Howe Institute and a professor in the Department of Economics at the University of Waterloo.

“Governments are not very good at that and we see that already. The allocations that have been done are perverse,” he said.

Colleges are fighting among themselves for the international students, he added. “At the University of Waterloo  (UWaterloo), the departments are fighting with each other about who gets them.”

UWaterloo’s annual tuition for international students ranges, depending on the faculty, from $50,000 to $60,000 per year – an obvious financial motive for trying to secure as many international students as possible.

“I don’t think the federal government can put this [issue] on the back burner and ignore it,” Skuterud said.

Ottawa plans to release new, updated multi-year immigration targets by the end of this year, “so they have to think vey carefully about how to target the number of new permanent residents” permitted to immigrate to Canada, he said.

The government’s 2025 to 2027 Immigration Levels Plan aims to decrease the population of non-permanent residents in Canada to five percent of the population by the end of 2026.

Usher pointed out that colleges in Ontario “would not have gotten into this mess [and] would not have gone chasing international student dollars if Ontario weren’t the worst-funded [postsecondary education] system in the entire country.”
In one year, the University of Toronto was getting more revenue from tuition charged to students from the People’s Republic of China than the funding provided by the Ontario government, he said.

Usher also noted that an estimated 75 percent of the teaching staff laid off at colleges after the federal cap was implemented were part-time instructors, brought in to teach the programs filled by international students.

Data from Colleges Ontario indicates that as colleges hired almost no fulltime staff even as they were expanding programs to attract more international students, he noted.

“They knew it was a bubble,” Usher said. “It’s like we blew up the balloon and now we’ve let air out of the balloon, and the balloon looks more or less the way it did in 2017 – only the provincial government is paying less.”

Unlike the colleges’ pain of laying off part-time staff and cutting programs, universities have collective agreements with faculty unions that make it very difficult to do anything to save money other than dismiss junior faculty, Usher said.

The financial pain from the federal cap on international students for universities “is not a sudden thing. It’s a slow and painful screaming and the gears are seizing up,” he said.

“It’s not going to end for another three to four years at least, I think. It [the impact] is both shallower and more difficult to resolve at the university level [compared with the college level].”

Canada’s international education strategy started well, but . . .

Canada’s International Education Strategy, implemented in 2014 by Stephen Harper’s Conservative government and aimed at attracting more international students and researchers, started out well, both experts said.

The idea was that many international students were coming to Canada to study at top universities, so they should be allowed to stay and become permanent residents.

“It wasn’t until about 2016, 2017 that the college sector really started to monetize [the system],” Usher said.

Colleges started telling students to come and spend eight months at college “and you’re on your way to citizenship,” he said. “That was a great value proposition for the students that came in. It might not have been as great a value proposition for Canada because the talent level was not necessarily at the same level.”

The number of postsecondary international students in Canada more than doubled in the decade between 2013/2014, growing from approximately 199,000 to 468,000 students, according to Statistics Canada.

The growth wasn’t linear, but rather an “uninterrupted growth” that accelerated significantly after 2020, with large increases in 2022 and 2023, including a 16-percent increase in 2022/23 alone.

The growth was particularly strong in Canadian colleges, with international student enrollments nearly quadrupling during the decade.

“The institutions that attracted the most opprobrium were institutions primarily in the GTA [Greater Toronto Area] that were, in effect, franchising curriculum from public colleges,” Usher said.

“When people talk about diploma mills, they’re actually talking about publicly funded colleges in Ontario that chose to use private companies to deliver their programs to students that they [the colleges] couldn’t or didn’t want to bring to their home communities.”

For example, Northern College had 700 students actually in Timmins but 7,000 students in the GTA, Usher said.

After Ottawa implemented the federal cap on international students, those types of college programs offered by private companies were immediately shut down, he said.

At the same time that the number of international students enrolled in colleges was quadrupling, Canada had a housing crisis, he noted.

Most of the international students enrolled in colleges in geographical areas where there was limited housing availability, such as the GTA, parts of southern Ontario, parts of the Lower Mainland, and in Halifax, Usher said.

“In the summer of 2023, it blew up. Those [housing] markets just went crazy and it became a political issue,” he said.

However, Skuterud said it’s a “complete mischaracterization” to describe the crisis that ensued as international students seeking a quick “back door” to Canadian citizenship or to blame the students.

Canada’s international education policy was very deliberate and long-standing, led by the federal government and pushed down to the provinces, he noted.

The model was to bring immigrants to Canada to study in postsecondary institutions, where they got immersed in acculturation, learned the language, obtained Canadian credentials and then become new permanent residents.

“So it’s far from a back door. They came under this model, this expectation of two-step immigration that they were sold. It’s very much a front door policy,” Skuterud said.

“That [model] has a lot going for it. You wouldn’t have found many economists that would disagree with that model.”

Government lacked vision and strategic goals for international student program

The trouble was that the federal government never decided what it was trying to achieve with its international student program, including what the strategic objectives were, both experts said.

Both experts participated in meetings with the federal government where they said it “was quite clear that Immigration, Refugees and Citizenship Canada and Foreign Affairs had completely different ideas about what this program was supposed to be about.”

“Talent doesn’t just mean PhDs. It doesn’t just mean universities,” Usher said. “But the government has to have a strong goal.”

The federal temporary foreign workers program morphed into opening up work rights for foreign students, Skuterud said. “So those in effect became the new temporary foreign workers,” working at low-paying jobs in Canada.”

“It comes back to thinking a lot more carefully about what’s the goal with this [international student program], what are we trying to achieve?” he said.

During the COVID pandemic, Ottawa became worried about “how the Timmy’s [Tim Horton’s] in Kincardine is going to work if we have to pay people higher wages,” Usher said. “So the government decided to bring in more international students to fill low-wage jobs.”

In the Greater Toronto Area, he noted, a lot of corner stores and convenience stores are now staffed by foreign workers, as are restaurants and fast-food establishments.

“We got used to the idea that we need to make international student policy about labour market needs,” Usher said.

“I don’t I don’t think we should be using international student spots to do what temporary foreign workers are supposed to do,” he said.

Instead, “we should be bringing in international students in a mix and proportions that are going to propel the economy to higher ground in the future. The idea is [economic] growth,” he said. “But now we’re saying it’s about short-term labour market needs. And that’s crazy.”

“That’s what we’re doing a lot of time in labour market policy, it seems to me, is foregrounding the immediate needs, which were often very low-wage jobs, and not thinking about what’s the talent we need to make ourselves a strong, independent country 10 years from now,” Usher said.

A long-term solution needs to be driven by data

Skuterud said the long-term solution can’t just be about generating revenue for postsecondary institutions and how they and governments are going to find more money.

“I think there are very clearly potential cost savings by doing things more efficiently,” including addressing faculty incentives that “are completely perverse,” he said.

“There’s also a need – I think it’s inevitable it’s going to happen – to take the handcuffs off postsecondary institutions in Canada and let them set their fees to some extent,” he added.

Canada needs to inject some differentiation into  the postsecondary market because international students are willing to pay high tuition fees for high-quality programs at top universities, Skuterud said.

For both immigration policy and the international student program, the system should be based on a point system that predicts migrants’ future earnings in Canada,” he said. “That needs to be prioritized and that’s not what’s being prioritized now.”

Colleges and Institutes Canada also has called on Ottawa to develop a new post-graduation labour strategy and protect future training and applied research capacity through stable and sustained system-level funding to public postsecondary institutions.

However, the federal government appears to be “in limbo” when it comes to finding a solution to the current situation, Skuterud said. “My sense is they’re taking a step back and there’s a lot of internal thinking about how to proceed.”

He pointed out that Statistics Canada and other government departments have developed “incredible databases” to track what the future earnings will be for graduates in every postsecondary program. “There’s really rich data to see what the outcomes are.”

“That data does not get used in the immigration system, it doesn’t get used in how these [international student] permits are allocated, it doesn’t get used for anything,” Skuterud said.

He said he has “tried very hard” to get permission to do analysis with that data, but “Statistics Canada won’t allow that kind of analysis to be done.”

In resolving the mess created by the federal immigration policy and cap on international students, “I think that’s where the future lies. We need this to be data-driven,” Skuterud said.

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