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Coronavirus Squeezes Universities’ Finances as Foreign Students Stay Home

SYDNEY—A group of first-year students gathered around a study table at the University of Sydney on a recent afternoon to work on an assignment for their global business course. There was just one problem: Nearly half the group was missing.

A few weeks into the start of their fall semesters, Australian universities are missing tens of thousands of students, a harbinger of troubles Western universities may encounter if global travel restrictions keep students from starting classes when the fall semester begins in the Northern Hemisphere.

Many Chinese students couldn’t return to the country after the Lunar New Year holidays because Australia imposed a ban on Chinese arrivals on Feb. 1. India, another large source of foreign students, has since asked its citizens not to travel. Many Western universities, including those in the U.S., Europe and Australia, have become increasingly reliant on revenue from foreign students, who often pay more in tuition.

Irina Yu, front right, said nearly half the students in her study group were stuck overseas because of the coronavirus.

Photo: Rachel Pannett/The Wall Street Journal

The University of Sydney, one of the country’s most prestigious universities, has halted plans for building projects not already under way and frozen staff recruitment and travel, as it faces a more than $100 million budget shortfall due to the coronavirus.

“We know these measures will create some challenges, but they are aimed at ensuring we can continue to contain the financial impact of this ongoing global health crisis,” the University of Sydney’s vice chancellor, Michael Spence, said.

As many as 12,000 of the university’s students were unable to make it back for the first semester, the university estimates. It expects to know the actual number once it conducts an audit at the end of the month when fees would be due.

Some of these students are attempting to continue their studies remotely, while others were forced to withdraw. China’s Ministry of Education generally doesn’t accept online degree courses, so universities are scrambling to figure out a way to offer some classes in person.

Irina Yu, a first-year student in the global business course at the University of Sydney, said she arrived in the country just ahead of the freeze on Chinese travelers. But more than 100,000 Chinese students didn’t make it back, according to the government, a big blow to an economy where foreign education is the fourth-largest export, worth about $20 billion a year.

Ms. Yu, an 18-year-old student from Nanjing, the capital of China’s eastern Jiangsu province, said many of her friends opted to stay behind because, with the disease spreading globally, they were afraid of traveling to a foreign country. But the longer they stay away the more likely they may change plans and drop out. Students who fail to show up to her conversational French classes by the end of March, for example, will have to withdraw from the course, she said.

At Australia’s top eight universities, 1 in 10 students is from China, the highest ratio in the developed world. S&P Global Inc. recently warned of a $2 billion revenue loss for the country’s universities because Chinese students can’t attend the first semester.

Brian Schmidt, the vice chancellor of another top school, Australian National University, said only about 20% of their roughly 5,500 foreign students returned for the start of the semester. A bunch more have returned home since, he said, with countries including China and the U.S. urging their citizens to return home. Student fees account for nearly half of the university’s $1 billion a year revenue.

“Who knows what is going to happen with Covid-19? We are facing the prospect of losing a semester or even losing a year,” he said. “We still need to be a university at the end of this, so we need to be creative about whatever life is throwing at us.”

The Reserve Bank of Australia has estimated that services exports—of which education is a big part—will fall 10% in the first quarter alone, shaving around half a percentage point off the GDP growth rate. That is just one of many impacts of the virus, which is expected to send Australia’s trade-exposed economy into its first recession since 1991. Its 28 years of economic growth is the longest continuing streak in the developed world.

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Several Australian universities went to great lengths to try to get students back in time, offering payments of as much as $5,000 to help them circumvent the travel restrictions with a 14-day stopover in a third country such as Thailand. That route is now closed, too: Australia banned all foreign nationals from entering after March 20.

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In Limbo

Many Chinese students are stranded outside Australia due to a coronavirus travel ban.

Chinese students studying in Australia,
by current place of residence*

Total:

188,894

Inside

Australia

Outside

Australia

Prof. Schmidt said Australian National University is running its residential housing—home to some 1,000 foreign students—“like a little military barracks” so that the buildings can remain open. University officials are enforcing social-distancing guidelines, scheduling when students use shared bathrooms and kitchens, and taking students’ temperatures each day.

What’s happening here could be a prelude of things to come for U.S. universities in the fall semester. The U.S. hosted nearly 1.1 million international students in the 2018-19 school year, the latest in a string of record-breaking years going back more than a decade, according to the Institute of International Education, a U.S. nonprofit group.

Most had already returned to the U.S. from their winter breaks by Feb. 2, when the U.S. restricted travel from China. But some European students who returned home for spring break were stranded by President Trump’s March 11 entry ban on travelers from the European Union.

The travel bans are one of a number of financial threats the education sector faces because of the coronavirus. As U.S. colleges and universities nationwide shut down dorms and dining halls, shifted to remote instruction and moved students back home, many families have asked if there would be a fee refund.

In Canada, the pandemic looks set to force universities to delay aggressive recruitment efforts, including in China. The country, having stemmed the growth of infections, has begun drawing back students from Western nations that the government thinks are bungling the fight.

“If the Chinese government sees that the coronavirus is still endemic in Australia in June, it might call its students home before our second semester starts in July,” said Salvatore Babones, an associate professor at the University of Sydney. “In that sense, we will serve as a leading indicator for U.S., U.K., and Canadian universities, whose fall semesters won’t start until late August.”

Prof. Babones wrote a paper for Sydney’s Centre for Independent Studies, a libertarian think tank, last year warning of the risks of relying on international students for revenue. He estimates that Chinese students spend about $40 billion a year globally on overseas tuition.

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Write to Rachel Pannett at rachel.pannett@wsj.com

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