The Peterson Institute for International Economics (PIIE) released a report warning that a new rule from the Trump administration, issued in July and set to take effect in September, could slash US economic output by $200 billion to $400 billion annually. This represents roughly 0.7% to 1.3% of GDP, according to the think tank’s analysis.
Policy Change Ends Open-Ended Stay
The new rule replaces the longstanding "duration of status" arrangement, which allowed international students to remain in the United States for the full length of their academic programs without a fixed deadline. Under the replacement policy, most international students will receive a stay of up to four years. After that period, they must apply for an extension to continue studying or to remain for post-graduation work through the Optional Practical Training (OPT) program.
The OPT program permits graduates to work in fields related to their course of study, and the new rule gives US authorities more discretion over whether international graduates can extend their stay through this route. PIIE warned that this could sharply reduce the number of highly skilled international graduates entering the US workforce, particularly in science, technology, engineering, and mathematics (STEM).
Impact on STEM Graduates and Innovation
The institute highlighted the critical contributions foreign STEM graduates make to US innovation. "US-trained foreign STEM graduates patent inventions at four times the rate of typical college graduates and establish high-growth startups at six times the rate of US-born graduates," the PIIE report said. These graduates are a key driver of research and entrepreneurship in the United States.
PIIE modeled a scenario in which the US suffers a sustained one-third drop in annual international student enrolment. The findings indicated that the economy could lose between $200 billion and $400 billion in output each year. This would also slow innovation, entrepreneurship, and long-term productivity growth.
Broader Economic Consequences
Beyond the direct output losses, the report noted that higher education functions as a significant export industry for the United States, currently accounting for roughly 5% of the country's services exports. A shrinking international student population would reduce those export earnings. The institute concluded that making the US a less attractive destination for international students risks lasting damage to the country's global competitiveness by narrowing the pipeline of skilled talent that underpins research and business creation.
Related: US Visa Services Restructuring in Africa
In a separate development, the US government announced it will shut down routine visa processing at 25 diplomatic posts across Africa from Saturday, August 1, 2026. Applicants will be redirected to a network of 20 regional hubs under a major restructuring of the State Department’s consular operations on the continent. The overhaul covers all routine visa categories, including tourist, business, employment, family-based, and immigrant visas. This move is part of a broader shift in US immigration and visa policy under the Trump administration.
The PIIE report was cited by the Economic Times on Wednesday, July 23, 2026, and by other major outlets as policy debates continue over the economic trade-offs of stricter immigration rules for students.
