Insights

February 28, 2024

What’s behind the federal government’s cap on international students and what does it mean for Alberta?

On January 22nd, the Government of Canada announced that they would be limiting the number of permits issued for new international students entering the country every year. Here, we’ll explore what the cap is all about, why it happened, as well as how it might affect Alberta and Alberta’s postsecondary institutions.

What happened?

First, for some context, around 550,000 international student permits were issued in 2022, a 75% increase from five years prior. The new cap will place a limit at 360,000 study permits per year for the next two years, a decrease of 35% from 2022 levels. That 360,000 total would bring the number of foreign students entering Canada back to about 2018 levels (excluding COVID effects in 2020).

It’s worth noting that there are several exceptions to the cap. First, it does not apply to renewals by current students. It also does not apply to those in master’s or doctoral programs, or students in programs below the post-secondary level. Students in these programs will account for roughly 75,000 more international students than the cap allows.

The specific allocation of permits hasn’t been made public, but under the new cap, individual provincial and territorial allocations will be weighted by population. Presumably, this means that a province’s share of total international student permits will be roughly proportional to its share of the national population. This distribution is intended to curtail enrollment in provinces which have seen the fastest growth in international student enrolment—in this case, Ontario and, to a lesser extent, BC (discussed further below).

Once the final distribution is known, it would be up to each province to decide how to allocate its share across its designated learning institutions. For additional oversight, the federal government will now also require an attestation letter from the provinces for every study permit submitted.

Another change announced by the federal government involves work permits for international students’ spouses. Previously, spouses could qualify for a work permit regardless of the post-secondary program in which their partners were enrolled. Under the new rules, work permit eligibility will be limited to the spouses of students in master’s or doctoral programs.

Why has the cap been introduced?

Effectively, the imposition of a cap was the federal government’s response to two concerning factors: an uncontrolled surge in international student enrolment, as well as the fact that many of those students were enrolled in lower-quality private education institutions. In effect, the existing system created opportunities for abuse while also threatening Canada’s reputation as a high-quality destination for international students.   

There are several factors behind the surge in international students, but one worth highlighting is that those students represent a significant source of revenue for post-secondary institutions. To make up for public funding shortfalls, many have opened their doors to more international students who pay up to five times as much for tuition as do domestic students. In Ontario, for example, international students account for 76% of all tuition fees.

On quality of education, the Government of Canada has noted that some private institutions are exploiting international students by offering poor-quality schooling. These institutions, sometimes even set up in strip malls, have become increasingly common, particularly in B.C. and Ontario. Some rely almost exclusively on international enrolment.

In addition to capping enrollment numbers, the federal government announced that international students attending these kinds of private institutions will no longer be eligible for postgraduation work permits. These permits are highly sought-after by international students, and, according to the Immigration Minister,  some private “puppy mill” schools take advantage of that fact by charging high fees for low-quality education simply as a loophole for the permits to be obtained after graduation.

On a related note, there are also issues of high absentee rates, with many students rarely attending or completing their programs at these institutions. This is another loophole in the existing system that allows international students to enroll in Canada simply to gain a foothold in the country to find work. In response, the federal government has tightened its financial requirements for prospective international students. Previously, students needed to prove they had access to $10,000 in order to come to the country to study. That threshold was doubled in December.   

In addition, the government is considering changing the rules around how much international students can work while also attending classes. Previously, there was a limit of 20 hours per week, but that limit was temporarily waived in November 2022 in response to concerns about labour shortages across the country. The temporary measure is set to expire at the end of April. The government is signaling that more restrictive rules will be put in place after that, but likely still more generous than the previous 20-hour limit.

This is a difficult balancing act for the federal government. On the one hand, it wants to limit potential abuses of the existing system. On the other, for students enrolled in high-quality programs, the ability to work on the side is critically important to helping them make ends meet.

Another factor behind the decision to introduce a cap on study permits was the fact that the recent surge in international students was contributing to the pre-existing strain in Canada’s housing supply. It’s not that international students created the problem, it’s just that even before the rapid increase in international enrolments, the supply of housing wasn’t keeping up with demand growth, driving ownership and rental prices higher. On top of that, international students themselves were struggling to find places to live because of local and on-campus shortages.

The bottom line is that these issues all threaten to undermine Canada’s reputation as a desirable destination for international students. International students offer considerable benefit to the country, especially as potential future permanent residents. There could be a significant economic cost to Canada by putting that reputation at risk.

How will the cap affect Alberta and other provinces?

Absent details around the allocation of study permits, it’s too early to say exactly how this new policy will affect Alberta’s post-secondary institutions.

That said, our own preliminary estimates suggest that the cap is not likely to have a material effect on the province. Alberta had just over 25,000 international students enrolled in the 2021-2022 academic year. If it were to receive a share of international student permits roughly in line with its population, that would result in an allocation of about 42,000 permits. Even if the actual number of permits ends up below that estimate, it’s unlikely that it would force post-secondary institutions to reduce the number of international students they admit. It could, however, limit future growth or curtail plans at individual schools to increase foreign student admissions.

What about other provinces?

Because international students were not evenly distributed across Canada to begin with, some provinces will be more affected than others by the cap. In particular, Ontario and, to a lesser extent, BC had previously attracted a large proportion of international students coming to Canada. As a result, the move to a per capita allocation will mean a more severe cut in those provinces. Nova Scotia and PEI could also see a modest decrease in foreign student enrollment as a result of the cap.

For the other six provinces, the cap will likely have no significant direct impact. What we don’t yet know is whether or not they will see an increase in foreign student enrollments because there are fewer spots available in Ontario and BC. From the Alberta perspective, that depends on a range of factors, including: student interest; how spots are allocated across (and within) post-secondary institutions within the province; and the availability of housing, among other considerations.

Conclusion: Implications of the Cap

From the vantagepoint of post-secondary institutions themselves, this permit cap could have a significant impact on the revenues they rely on to operate. Either provincial funding will have to increase to offset the difference or the effects could include tuition hikes, program cuts, and/or layoffs.

For its part, Alberta has a relatively low share of international students compared to Ontario and British Columbia, and it is highly unlikely that the cap will negatively impact enrollment. Although, as mentioned above, it could limit future growth in some post-secondary institutions.

Aside from the legitimate concerns of those institutions, this policy could create a strategic opportunity for the province. International students create bridges to their home countries, and those that remain in Canada tend to be among the most successful economic immigrants.

To capture this opportunity and avoid unintended consequences, however, we need to ensure there are enough spaces at Alberta post-secondary institutions to accommodate both international and domestic demand. We also need to prioritize international student enrollment in fields for which labour demand is high, and avoid the systemic abuses (seen in Ontario) that created the impetus for this cap in the first place. And finally, Alberta needs to plan ahead to ensure we have adequate infrastructure and public services—especially housing and health care—to supply the needs of students and Alberta residents alike.

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