The Ontario government recently announced a 10% reduction in tuition for the 2019-2020 academic year, followed by a tuition freeze the next year, and there are some other changes to student aid programs.  (Note:  the 10% reduction applies to Canadians, not international/visa students.)  A blog by Alex Usher has a nice summary and analysis of the announced changes, and he concludes that for students the bottom line is that wealthier families will save some money, and less wealthy students will end up with more student loans.

Everyone likes a discount when they’re shopping.  For the retailer, they give up a bit of a markup or profit margin but still generate some profit.  However universities are non-profit institutions and have no big markup to give up.  So, although I have no particular insider information about the effects on the universities, it’s not difficult to predict.

For engineering, if I recall correctly tuition makes up over 50% of the revenue stream for teaching so a 10% tuition cut is at least a 5% revenue cut.  There might be some economies to be found here and there, but most of a university’s budget goes towards salaries.  Over time there will likely have to be some shrinkage of staff and faculty numbers, and we’re already postponing some filling of vacant faculty positions.  Students are unlikely to see or notice big changes, but there may eventually be fewer elective courses available, for example.

As Alex Usher’s blog points out, one way universities could respond is to admit more international students who pay a lot more tuition.  Hopefully this would not be at the expense of admitting Canadian students, but when governments start applying shocks to the system there can be unintended consequences.