Adrian Bailey, the committee's chairman, said: "There is a clear conflict between this policy and the desire to attract more overseas students to the UK. Moreover, the way in which the policy has been implemented and measured is clearly having a detrimental impact on the UK's ability to expand our share of the overseas student market."
Almost 70 chancellors, governors and university presidents wrote to the Prime Minister calling for overseas students to be removed from the net migration figures earlier this summer, saying it could cost the British economy millions as foreign students go elsewhere instead.
Britain attracts about one in 10 students who study outside their home country, generating roughly £8 billion a year, "with forecasts suggesting that export earnings from this activity could more than double by 2025", the campaigners said.
Nicola Dandridge, chief executive of Universities UK, added: "We must be careful about the ways legitimate concerns at home about immigration could damage our international reputation as a welcoming place to study.
"Far from deflecting the public's concerns about immigration, we believe that taking students out of the net migration equation would create a more open and focused public debate on immigration. It would also mean universities could work better with Government in targeting any international students who should not be here."