The GP didn't specify U of T St. George campus specifically, but if we're assuming they were, students have a wide variety of residence options available to them at great rates[1] provided by the university. In cases where students don't wish to remain in the residences, they can move out and share apartments or condo units.

Also, there aren't any U of T buildings[2] close to the Quayside cordon[3], hence I find it hard to believe that this particular project (or any) will raise rents all that much for students attending U of T on the St. George campus.

[1] https://www.studentlife.utoronto.ca/hs/st-george-residences

[2] http://map.utoronto.ca/

[3] http://www.quaysideto.ca/

So the uni should relocate or build more extensive student housing? Not sure how that is a problem for the city itself. Not everyone gets to live in prime areas.

If Toronto was building everywhere they would.

Toronto is building everywhere around there. That's why every conversation about development in Toronto goes back and forth between 'too many condos!' and 'too expensive housing'.

UT is already present in the suburbs.

exactly