The growing economics of educational uncertainty

Just as geopolitics is redefining the conditions under which educational institutions operate, economics is changing their capacity to do so. Economic forces are radically transforming the sustainability and growth of the education sector, compelling institutions to reconsider how they will finance their future.

The first of these forces is inflation. Educational institutions face mounting financial pressure: they struggle to cover rising costs with diminishing revenues. Global inflation exceeded 8% in 2022, the highest level in decades, driving up both campus operating costs and families’ ability to finance an international education.

In the United States, the cost of university education has tripled since 1980. In 2022 alone, institutional expenditure rose by 14.9%, while revenues fell by 5.4%. In the United Kingdom, nearly half of all universities face fiscal deficits, driven primarily by the decline in international students and rising costs.

This is compounded by a growing trend towards cuts in state budgets for public education. Many governments, particularly in the Global South, face increasingly limited resources for health, pensions and education. In 2023, more than 40% of the world’s population lived in countries that spent more of their budgets on servicing external debt than on education or health.

The World Bank has demonstrated that a 1% increase in external debt is associated with a 2.9% decrease in investment per school-age child. This has created a paradox in education financing: the greater the debt, the lesser the capacity to invest in future generations.

Exchange rate volatility is also altering who can access an international education. For thousands of students from economies with unstable currencies, the macroeconomic context has become a factor in their decisions. A 2023 survey revealed that 51% of international students reconsidered their studies due to exchange rate fluctuations, while 4 in 10 reported not having sufficient resources to cope with the rising cost of living in their destination countries.

Is the university degree still fit for purpose?

But even if institutions manage to adapt to the new geopolitical and economic realities, a deeper question emerges: is the educational model still fit for purpose in responding to these new realities?

Artificial intelligence is now redefining the relationship between education and employability. According to the World Economic Forum, 39% of labour market skills will be transformed or rendered obsolete, and 59% of the workforce will require reskilling by 2030. At the same time, automation is beginning to affect entry-level graduate jobs in particular, which have fallen by 29% since 2024.

This transformation is also changing how companies attract talent. In 2024, around 45% of companies eliminated university degree requirements for many of their vacancies, calling into question whether a university degree is now a sufficient guarantee for the new realities of the labour market. The question, therefore, is no longer what institutions teach, but what added value they offer in a world where technology is increasingly replacing our work.

Educational institutions have survived wars, economic crises and technological revolutions. What makes this moment singular is that these three pressures have converged and are reinforcing one another: geopolitics restricts mobility and fragments scientific collaboration; economics erodes the financial sustainability of institutions and students’ access to them; technology calls into question the employability value of the university degree itself. The challenge is not to manage each of these forces in isolation, but to understand that they operate simultaneously and systemically.