Rising costs for overseas students could well mean that we lose them to foreign competition

The Sri Lankan family I joined for dinner at their home in the suburbs of Colombo last month is proud to have a son studying at a British university. It is a struggle to find his fees and living costs, not to mention the costs of his student visa, but they consider it worthwhile because "UK education is the best".

The father, who runs his own business, does extra work as a tour guide to fund his son's studies. The son works at a fast-food outlet in London (within the strict limits allowed by the Home Office) in order to help cover his living costs.

But it is a long slog, six years so far to attain a first degree. He cannot afford trips home so his mother has not seen him since he left for the UK. For overseas students like this, and their families, it is a big financial sacrifice. Their hope is that a British degree will lead to a well-paid job, preferably abroad where pay is higher. But it is a gamble, especially in the current economic climate.

It is also very hard for overseas students to know quite what sort of education they will get. The image of UK education sold abroad draws heavily on the traditions of Oxford and Cambridge. But what do overseas students make of newspaper adverts for places such as Magna Carta College, Oxford, which is not actually part of the University of Oxford but offers degrees validated by the University of Wales?

What's more, it is getting tougher on several fronts for overseas students. The visa hurdles are getting higher, fees are rising, competition for places is stiffer and graduate jobs are harder to win. Is the overseas student market being squeezed too hard?

The 250,000 non-EU overseas students in UK universities bring vital income. With the squeeze in domestic funding, universities are seeking to maximise other sources of income. Last year, it is estimated the level of fees charged to overseas students rose by 5%. Average fees for undergraduate courses now cost between £9,300 for standard courses and £11,500 for laboratory-based courses.

The government is also raising costs for overseas students. The standard application fee for the tier 4 student visa rises next month from £145 to £199. For many, costs are even higher. Students who can only afford to build a degree out of a number of short courses will often have to apply for extension visas after they have arrived in the UK. The charge for a student visa in such cases is a whopping £357 for postal applications or £628 for applications in person.

In another change, following the review of visa requirements ordered by the Prime Minister, it was announced earlier this month that overseas students applying to come on courses that are below degree level will now have to prove that they already have intermediate English language skills, rather than the beginner level that was required previously.

And students on courses below degree level will now only be able to do 10 hours a week of paid work during term time, rather than the 20 hours allowed previously. This will be tough for students on diploma courses, for example, who need to work to pay their way.

Meanwhile, the visa application process gets ever more complex. The current adult student visa application is 41 pages long. Many students fork out considerable extra fees to lawyers and specialist agencies to help them to complete the forms.

For now, the overseas student market is still booming. The latest figures from Ucas show that applications from non-EU students to degree courses are up by 21%. Interestingly, though, applications from EU students from outside the UK – who are not subject to visa requirements and pay the same fees as domestic students – are up by over 33%.

For a long time the UK has been able to rely on the reputation of British education to keep applications rolling in. But competition is intense. Australian and North American universities now recruit aggressively throughout Asia.

For now, the goose is still laying the golden eggs. But there is a real risk that overseas students will start to feel they are not getting a good deal from the UK. With government funding being squeezed, that would be a double whammy for universities.

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