Raghuram Rajan warns US risks future by curbing foreign students

In an interview with Bloomberg TV Wednesday, Rajan cautioned that foreign student inflows have historically been a cornerstone of US innovation and economic leadership, but that current policies risk unraveling this advantage.

“The Sergey Brins of the world came as students and did wonders for the US economy,” Rajan said, pointing to one of the founders of Google. “To some extent, the problem is the universities haven’t made the case that they are so central to US growth, but also central to the distribution of that growth.”

Rajan, who is professor of finance at the University of Chicago Booth School of Business, warned that squeezing foreign students could impact job growth, noting that companies like Alphabet Inc.’s Google employ thousands, thanks in part to immigration-linked talent pipelines.

At the heart of Rajan’s concerns is the ongoing battle between the White House and universities — one that initially centered on elite schools such as Harvard University and Columbia University over antisemitism — but that’s morphed into a larger attack over the role of US higher education. On Tuesday, the Trump administration escalated that fight further by ordering US embassies worldwide to stop scheduling interviews for student visas as it weighs stricter vetting of applicants’ social-media profiles.

“It is not a great environment,” Rajan said, citing rising fears among academics and administrators over visa security and retaliation from the White House. “It’s an environment which is inhibiting the ultimate production that the universities contribute to the US economy.”

International students accounted for 5.9% of the total US higher education population of almost 19 million. In the 2023-2024 school year, more than 1.1 million foreign students came to the US, with India sending the most, followed by China. 

The former central banker also drew a parallel between the decisions foreign students now face and the investment choices businesses make amid uncertainty. “If uncertainty increases, you tend to either postpone the investment or take it to a place where things are more certain,” he said.