Geopolitical Risks in Higher Education: How Activism Cracks Threaten University Investments

The arrest of Mahmoud Khalil, a pro-Palestinian Columbia University student turned immigration target, signals a seismic shift in U.S. higher education's geopolitical landscape. By weaponizing Cold War-era laws to silence dissent, the Trump administration has unleashed a crackdown that could permanently alter international enrollment patterns—and with them, the financial health of universities. For investors, this is no longer just a campus issue. It's a systemic risk threatening endowments, enrollment revenue, and reputational capital.

The Khalil Case: A Blueprint for Repression

Khalil's detention without criminal charges—and his eventual release amid legal challenges—exposes a troubling strategy. The administration invoked Section 237(a)(4)(B) of the Immigration and Nationality Act, a Cold War relic allowing deportation if a student's activism is deemed a “serious adverse foreign policy consequence.” This precedent sets a dangerous threshold: universities now face pressure to police student speech or risk federal retaliation.

The fallout is clear:
- Over 300 student visas revoked by 2025 for “anti-American” activism.
- Universities like Columbia and NYU face enrollment declines as non-citizen students flee perceived hostility.
- Geopolitical tensions have slashed Chinese enrollment by 25% since 2019, costing universities $14.3 billion annually.

The ETF's underperformance since 2023 aligns with rising geopolitical risks.

The Financial Toll: More Than Tuition Losses

The direct financial hit to universities is staggering. International students contributed $43.8 billion to the U.S. economy in 2023–2024, with STEM programs relying heavily on Chinese talent. But the crisis extends beyond revenue:

1. Endowment Risks: Universities with large international enrollments (e.g., Columbia, NYU) face liquidity strains. A would likely show declining liquidity as enrollment dips.
2. Reputational Damage: Lawsuits over due process violations and accusations of ideological censorship could deter future students and donors.
3. Talent Exodus: Over 60% of computer science PhDs go to international students. Losing this talent pool threatens U.S. innovation leadership.

Geopolitical Spillover: The New Education Cold War

The U.S. is ceding ground to competitors:
- Canada: Enrollments hit 840,000 in 2024 (+39% since 2019), offering streamlined visa processes and open policies.
- Australia/UK: Aggressively marketing themselves as “welcoming” alternatives to the U.S.

Meanwhile, the U.S. risks alienating allies. Arresting students for pro-Palestinian activism—and branding critics “anti-American”—could strain relations with Middle Eastern and South Asian nations.

Investment Implications: Divest Now, or Diversify

The writing is on the wall for education stocks:

Avoid:
- Highly exposed institutions: Universities with >40% international enrollment (e.g., Stevens Institute of Technology, Lincoln University) face existential risks.
- ETFs tied to U.S. universities: The EDUC ETF has underperformed the S&P 500 by 12% since 2023.

Consider:
- Competitor nations: Invest in Canadian universities (e.g., University of Toronto endowment funds) or Australian education stocks (e.g., Navitas, NASDAQ: NVT).
- Online platforms: Companies like Coursera (COUR) or 2U (TWOU) benefit from global demand for flexible education.

Conclusion: The Classroom as a Battleground

The Khalil case isn't an isolated incident—it's a symptom of a broader shift. As universities become collateral damage in geopolitical wars, investors must prioritize institutions insulated from political volatility. The U.S. higher education sector may never recover its global dominance if it continues to weaponize dissent. For now, the smart money is looking north, south—and anywhere outside the crossfire.

The data suggests Canada and Asia are the new frontiers of educational investment.