Lana Oconnell
International students can have incomes, and they contribute significantly to the economies of their host countries. In the US, international students contributed nearly $44 billion to the economy during the 2023-2024 school year, while in the UK, a single cohort of international students contributed up to £3.2 billion. International students may work part-time while studying and often continue to do so during vacations. Their income may come from jobs in local businesses or on-campus employment. In the US, international students on F-1 visas are generally exempt from FICA taxes on wages earned for services performed within the country. However, they may still need to file tax returns and may even be eligible for tax refunds. The tax requirements for international students vary depending on their visa status, country of residence, and the specific regulations of their host country.
| Characteristics | Values |
|---|---|
| International students in the UK claiming welfare benefits | Most international students are unable to claim welfare benefits, and claiming them could breach their immigration conditions |
| International students in the UK working | Generally liable to UK tax and National Insurance contributions in the same way as other UK taxpayers |
| International students in the UK with income or gains in the UK or overseas | Must work out their tax residence status and understand how this affects the scope to which they might owe UK tax |
| International students in the UK with income or gains abroad | May have to pay taxes in both the UK and another country |
| International students in the UK with income from a country that has a double taxation agreement with the UK | May not need to pay UK tax on payments received from outside the UK if they are made for the purposes of their maintenance, education, and training |
| International students in the UK with records demonstrating that an exemption is justified based on the specific wording of the double tax agreement | HMRC may ask for more information if the relevant amounts exceed £15,000 a year (excluding course fees) |
| International students in the UK with refugee status, Humanitarian Protection, or Discretionary Leave | Should get advice from their institution, Students' Union Student Advice Service, Citizens Advice Bureau, or Law Centre about applying for any welfare benefits |
| International students in the US | Make up about 6% of all university enrollment, contributing $40 billion to the economy annually |
| International students in the US compared to US students | International students pay more than students who attend college in their home states, sometimes two or three times as much |
| International students in the US with off-campus jobs | Forbidden from working off-campus jobs, but some are working illegally |
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What You'll Learn
International students' income in the US
International students in the US have diverse sources of income, including personal and family funds, foreign sponsors, scholarships, and grants. They are generally ineligible for need-blind admissions and federal grants, with less than 20% receiving grant funding from a federal source. The majority of international students in the US are funded by their families or foreign sponsors.
International students pursuing graduate studies, particularly in STEM fields, may have access to grant funding for advanced research. They also contribute significantly to the US economy, with their collective economic impact reaching a record-breaking $43.8 billion during the 2023-2024 academic year, according to NAFSA: Association of International Educators. This contribution supported over 378,000 jobs in the US, with one job created or supported for every three international students.
The presence of international students in the US higher education system offers numerous benefits beyond economic contributions. They drive entrepreneurship and innovation, and research and development, particularly in critical STEM fields. International students also enrich the academic environment by bringing diverse perspectives into US classrooms, fostering global competence among American undergraduates, and facilitating long-term business relationships.
The economic impact of international students is felt across various states, with California, New York, Massachusetts, Texas, and Illinois being the top five states benefiting from their presence during the 2023-2024 academic year. The contribution of international students to local economies is significant, with nearly 1,716 international students in Mankato, Minnesota, bringing in approximately $45.9 million and supporting around 190 jobs.
The tuition fees paid by international students also contribute to the financial landscape of US higher education. They often pay higher tuition fees than their American counterparts, with an average of $24,914, compared to $14,900 for American students at colleges in New England. This higher tuition rate contributes to the overall economic impact of international students in the US.
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International students' income in the UK
International students in the UK are a significant contributor to the country's economy, with their tuition fees making up a notable portion of UK universities' total income. In the 2023/24 academic year, fee income from international students was £12.1 billion, accounting for 23% of the total income of UK universities. This marks a substantial increase from around 5% in the mid-1990s and 15.6% in 2016-17. The absence of fee caps for international students allows universities to charge higher tuition fees, providing a substantial financial boost.
The number of international students in the UK has been steadily increasing over the years, with around 758,855 international students pursuing degrees in the country during the 2022/23 academic year. This number represents a nearly 12% increase from the previous year. The UK's flexible immigration system and the reputation of its academic institutions are key factors in attracting international students.
International students not only contribute to university finances but also positively impact the UK economy as a whole. A recent study estimated that international students starting their studies in 2020/21 would generate up to £41.9 billion for the UK economy, far surpassing the estimated cost of hosting them and their dependents (£4.4 billion). Additionally, international students spend a significant amount on living expenses, such as accommodation, groceries, and bills, further boosting the economy.
While international students bring financial benefits, their presence in the UK also raises questions about income sources and welfare benefits. The growing reliance of universities on international tuition fees has sparked concerns about financial risks if assumptions about future growth in international student numbers prove overly optimistic. Additionally, most international students are unable to claim welfare benefits due to visa conditions, and claiming them could breach their immigration status.
In conclusion, international students in the UK make substantial contributions to university finances and the broader economy. The UK's academic reputation and flexible immigration system continue to attract a growing number of international students. However, the reliance on international tuition fees and the complexities of welfare benefits for international students are important considerations for universities and policymakers.
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International students' income tax treaties
International students in the US on an F-1 visa are generally considered nonresident aliens for tax purposes for the first five calendar years of their stay. Most F-1 students are exempt from paying FICA taxes on wages for services performed in the US. However, they are required to file a federal tax return (Form 1040-NR) to assess their federal income and taxes.
The US has income tax treaties with 65 countries. Under these treaties, residents (not necessarily citizens) of foreign countries may be eligible for reduced tax rates or exemptions from US taxes on certain types of income, including pensions, interest, dividends, royalties, and capital gains. These treaties also allow US residents and citizens to be taxed at reduced rates or be exempt from foreign taxes on certain types of income.
Students and scholars who are nonresidents for tax purposes and intend to take advantage of a tax treaty benefit should provide IRS Form 8233 and a tax treaty statement to their US income provider. They may also need to submit a country-specific statement to the IRS for review and approval. Additionally, they must have a Social Security Number before any exemption from withholding can be granted.
It is important to note that some states in the US do not honor the provisions of tax treaties, so it is recommended to consult the tax authorities of the specific state to determine if any state tax applies to the income.
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International students' income tax refunds
International students in the US on F-1, J-1, M-1 or Q visas are liable to pay federal and state income taxes on their US-sourced income. This includes wages, tips, scholarship and fellowship grants, and dividends. International students are considered nonresident aliens and must file a federal tax return using form 1040-NR to assess their federal income and taxes.
It is important to note that each state in the US has its own tax system and regulations, which may require foreign students to file a state tax return and pay state income tax even when no federal return is due. Additionally, the US has income tax treaties with 65 countries, which can reduce or eliminate taxes on certain types of income, such as pensions, interest, and dividends.
International students can benefit from tax treaties with their home countries, which may result in reduced tax rates or exemptions from US taxes on certain types of income. In some cases, F-1 students can claim a tax treaty that can reduce or fully exempt their income from taxes, and any overpaid amount will be refunded.
To determine if you are due a tax refund, you can use services like Sprintax, which offers software that considers your allowed expenses, tax treaty benefits, deductions, and exemptions to help you prepare a compliant tax return and reduce your income tax liability. Most F-1 students are not required to pay FICA tax unless they have been in the US for more than five years.
While most international students in the UK are unable to claim welfare benefits, those who have worked in the UK may be able to claim benefits based on National Insurance contributions, such as statutory sick pay. It is important to understand the immigration conditions and seek advice from the relevant institutions to avoid any potential breaches.
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International students' income and job creation
International students enrolled in colleges and universities in the United States contribute significantly to the country's economy and job market. During the 2023-2024 academic year, international students contributed approximately $43.8 billion to the US economy and supported more than 378,000 jobs. This economic contribution is the highest ever recorded by NAFSA, the world's largest nonprofit association dedicated to international education and exchange.
The presence of international students in the US higher education system has increased over the years, with 1.1 million international students enrolled during the 2023-2024 academic year, almost four times the number in the 1979-1980 school year. This increase in international students has had a positive economic impact, with their spending supporting the US economy and creating jobs. For every three international students, one US job is created or supported.
The economic contributions of international students are not limited to tuition fees and spending on campus. They also bring cultural and academic value to campuses and local communities. Additionally, international students create ties between the US and their home countries, develop friendships with Americans, and gain an understanding of American culture and society.
However, it is important to note that international students in the US generally do not have access to welfare benefits due to their immigration status. Claiming these benefits could lead to breaching their immigration conditions and serious consequences. Therefore, international students are expected to be financially independent and self-sufficient during their studies in the US.
In conclusion, international students in US colleges and universities make a significant contribution to the country's economy and job creation. Their presence not only brings diversity and cultural exchange but also has a tangible economic impact, supporting local communities and the nation as a whole.
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Frequently asked questions
International students in the US on an F-1 visa are considered nonresident aliens for tax purposes and are only taxed on their US-sourced income. They must file a tax return even if they did not earn any income. Students from countries with a tax treaty with the US may be exempt from paying taxes.
The US, Luxembourg, and Iceland are some of the best-paying countries for international students, with average monthly net salaries of up to $6,455, $6,663, and $6,441, respectively.
Yes, international students contribute significantly to the economies of their host countries. For example, in the US, international students contributed nearly $44 billion to the economy during the 2023-2024 school year, and in the UK, a single cohort of international students contributed up to £3.2 billion. International students create jobs, spend money on rent, restaurants, and travel, and often work part-time while studying, paying taxes on their earnings.
