Won’t that make people not want to go there and select somewhere else instead causing a reduction in the student population?

Having English-preferring students go somewhere else seems to be aligned with their goal.

they encourage French-speaking Quebecois to have more babies (and they already do this)

It's understandable that this is not enough, they'll grow up speaking more English than French. Most yougsters in Montreal seem to be fluent in English, so it becomes a matter of diminishing the forces that give younger generations more reasons to speak English day to day. One of those forces is having a bunch of student colleagues that only speak English and attend English classes.