Canadian universities pay a price for stable provincial funding that could hamper their efforts to attract international students in the future, says a report released Thursday by Moody’s Investors Service.

In exchange for revenue, provinces limit per-student funding and impose controls on tuition or tuition increases that have prevented universities from raising fees to meet all the demand for higher education. As international competition for students, faculty and research dollars heats up, an “inability to appropriately invest in facilities could become a comparative disadvantage,” the report says.

To attract international students, universities may have to look to private funding to build new facilities. Public-private partnerships in which universities build residence halls and private firms manage them is one example. Already, Quebec schools issue bonds to add student services or buildings.

The option of deregulating fees is not open to Canadian public institutions. In fact, Ontario imposed an average cap of 3 per cent in tuition increases in the last budget.

Programs that have raised tuition to market levels, however, have not seen declining enrolment. In 2010, for example, McGill University replaced the $1,700 fee at its Desautels Faculty of Management with a $30,000 bill, and eventually won a battle with the province’s Education Ministry. “They found they still had the same number of students that were enrolling, and in fact demand increased when tuition increased. So to some extent that tuition cap is a detriment,” said Michael Yake, vice-president at Moody’s Investors Service and one of the authors of the report.

“But the tuition framework is positive overall because it assures the university a certain amount of tuition and the schools don’t have to be competitive against each other,” Mr. Yake said.

If provincial budgets deteriorate, however, universities would likely be caught in the headwinds, the report says. Quebec universities have faced cuts of $125-million over the last two years and the pressure to achieve a balanced budget means the agency will continue to monitor the risk of further cuts. Moody’s has been rating the bonds of Canadian universities since 2002.

Postsecondary institutions are beginning to consider international students as part of a wider discussion about the right “mix” of students on campus, not just in terms of the higher revenue they provide, said Jennifer Humphries, a vice-president at the Canadian Bureau of International Education. “What they don’t want is a terribly homogeneous mix,” she said.

Others hope to achieve goals that reflect the history of their campus. Last fall, the University of Ottawa decided to charge domestic tuition fees to international students who wanted to study primarily in French, a move that would save the students between $7,000 and $8,000 a year and reinforce the school’s bilingual identity. The new policy made the front pages of newspapers in North and West Africa where the university recruits, said Caroline Renaud, the director of the university’s international office, and was also championed by Michaëlle Jean, UOttawa’s chancellor.

The majority of students who took up the offer this year are from Morocco, Senegal, Ivory Coast and other African countries but 20 students from China have also signed up for programs taught in French. In total, 316 new students have enrolled in primarily francophone programs compared with 98 last year. “We don’t see it as a loss of tuition; we see it as a gain of francophone students. These students would not have come if the tuition waiver was not in place,” Ms. Renaud said.

The university has surpassed its goal of having 9 per cent of its student body come from abroad by 2020 but it also wants to increase the proportion of international students studying in French to 40 per cent. It is halfway to that target. Ms. Renaud said that the university has not received many complaints from other international students but that she is not surprised some international students have told other media they are frustrated. “If I walk on campus and ask the question, the answer is almost automatic … To ask the question is to answer it, but there’s no movement on campus [against the proposal],” she said.

Offering a lower fee to some groups of international students is not practised at most Canadian universities. French students at Quebec schools pay domestic fees as part of a bilateral agreement between the two jurisdictions and McGill and Concordia offer fee reductions to international and out-of-province students for some French-language programs and courses.

According to the CBIE, new numbers show that last year saw an increase of 11 per cent in the number of international students studying in Canada to almost 300,000.

The Globe and Mail
Published Thursday, Sep. 04 2014, 12:01 AM EDT
Last updated Thursday, Sep. 04 2014, 12:01 AM EDT