America attracts some of the brightest students from around the globe, with many US universities and boarding schools ranked as the worldʼs finest educational institutions. However, a key issue that both parents and students should keep in mind is how to manage work prospects after graduation.
Post graduation work opportunities: OPT
Optional Practical Training (OPT) is a method for international students to obtain post-graduation work experience. The standard amount of OPT time is up to 12 months. For students holding a degree in certain Science, Technology, Engineering, or Math (STEM) subjects, the total OPT time can be up to 36 months.
However, it is important to note that OPT is not necessarily guaranteed. Unfortunately, young people living away from home for the first time can often get distracted or side-tracked with the plethora of activities on a college campus. Regrettably, there are many instances of international students falling out of immigration status or missing certain OPT filing deadlines, because of poor communication with the Designated School Official (DSO) within a university's international students office. That is why we recommend international students to remain in close contact with the DSO and update the DSO on issues such as poor grades, illness, the need to transfer universities, or the desire to apply for OPT to avoid these issues.
In addition, it is worth noting that the three-year STEM OPT opportunity may be available for subjects that are not traditional STEM fields. For example, recently there is a trend for Master of Business Administration (MBA) programmes with sufficient quantitative content to also qualify the student for three-year STEM OPT. In fact, if a student has a STEM undergrad degree and a STEM MBA degree, one could have up to six years of OPT work experience.
Post graduation work opportunities: Work visas and green card
For some graduates, the available OPT time may be insufficient and they may prefer to obtain a longer-term work visa. In this case, it is important to pay attention to the annual filing deadlines for the H-1B Specialty Occupation work visa lottery, which occurs once a year in March. Winning the H-1B lottery is certainly not guaranteed (i.e. average odds may be around 25-30%); however, the chances of winning can be increased if the student has a US master's degree or higher. That is because, beyond the regular cap of 65,000 H-1B visas, there is an additional pool of 20,000 H-1B visas for those with a US masterʼs degree or higher, thereby potentially increasing the lottery odds to around 50%.
Nevertheless, the uncertainty of the H-1B lottery may encourage some families to choose the EB-5 immigrant investor visa (minimum investment currently US$800,000) option instead, which is a green card (i.e. permanent resident) path. Under updated EB-5 guidelines, it is now possible for a student already in the US to file for file for adjustment of status and an EB-5 application at the same time. Therefore, if a student is in the US already and decides to adjust status, after approximately six to 12 months, they should receive Employment Authorization – allowing them to work for virtually any employer in the US – while the EB-5 case is still pending. In some circumstances, by the time the student graduates from university, they may already have a Green Card, which would make post-graduation job hunting much easier.
US income and inheritance tax
The US tax system can be a complicated and potentially a prohibitively high burden for some international families. In general, there are three types of people who are subject to US tax on a worldwide basis, that is: US citizens; US green card holders; and those who spend a sufficient number of days in the US (ie fail a “day-count” test). But interestingly, students on a F-1 visa are generally considered non-resident for tax purposes for the first five calendar years in the US (in other words, days spent in the US may not count towards the “day-count” test).
Another tax consideration is the scenario when your children may obtain a US green card or perhaps marry a US citizen or green card holder. In such a scenario, the family may have inheritance tax exposure and upon passing of up to 40%. As children become more exposed to the US and potentially decide to permanently stay in the US, it is important to have a conversation with your tax/estate planning attorney in order to discuss potential will, trust, or other succession planning options to protect the family's wealth across generations.
America is one of the worldʼs top education destinations. An international student should try to take full advantage of potential post-graduation work opportunities, while at the same time mitigating potential tax exposure to the family's wealth.