Quebec tuition hike would likely downgrade McGill, Concordia credit scores: Moody’s

The Quebec government tuition hike plan for English universities will make borrowing money more expensive for McGill and Concordia, according to a report by Moody's credit agency.

Moody's says McGill University, with a credit score of Aa2 stable, and Concordia University, at Aa3 stable, could see their scores downgraded, since they stand to lose substantial sums of money under the new tuition system.

The Coalition Avenir Québec government announced in October it intends to increase tuition fees from about $9,000 to $17,000 for out-of-province undergraduate students and non-research graduate students.

But those higher tuition fees won't go into McGill or Concordia's coffers.

The government says the extra funds coming in — about $110 million a year — will be redistributed across universities, especially French-language institutions, in an effort to bolster French.

The policy would lead to McGill and Concordia having the highest domestic tuition fees across Canadian universities, exposing them to further reputational and financial risks.

"Lower demand among Canadian non-Quebec students could also weaken the reputation and strategic brand of both universities by materially altering the compositions of students," the report read.

McGill deputy provost Fabrice Labeau, says adding the potential credit downgrade to the expected revenue losses as some students stay away add up to a "double whammy." He says the university was already looking at losses of between $42 to $94 million annually just because of the tuition hike.

It's not clear how much a downgraded credit score would end up costing McGill or Concordia.

The government's policy would effectively price McGill out of the market for drawing out-of-province students, Labeau says.

For the 2022-2023 school year, 23 per cent of McGill undergraduate students were out-province-students.

International students make up 26 per cent of the study population at McGill and 24 per cent at Concordia, which is above the median for Canadian universities.

McGill has already said that the policy would jeopardize its music school where 40 per cent of students are from out-of-province. The university might also have to cut intervarsity athletics teams, which rely heavily on Canadian, non-Quebec students, if it is unable to draw enough talent.

"If we take a very large hit in terms of the composition of our student body, our own rankings will go down in the next few years," Labeau said. "It may not be instantaneous, but over time, we will feel the pain of that situation."

Concordia announced last Thursday that it is already facing $35-million deficit this year and has started cost-cutting measures, including a hiring freeze of non-academic staff, freezing the salaries of the president and executive team and tapping into several reserve funds.

The credit agency says although the universities might try to recruit international students to make up for losses, they would face more risks beyond their control, such as policy changes to immigration