Michael Goldbloom says he made the decision because of the serious financial challenges Bishop's is facing.
"Although the provisions of my contract are consistent with the norms for university heads in the rest of Canada, I have decided that it will be best to forego the additional leave," Goldbloom said in a statement.
Goldbloom said he doesn't want the government to make the salary allowance an issue during future negotiations.
"It would not be possible for me to continue as Principal if I am compromised in my ability to represent the university in what will be critical negotiations with the Quebec Government," Goldbloom said in a statement.
Today's announcement comes a week after Quebec's Education Minister questioned the departure bonus that Bishop's University planned to pay Goldbloom.
A Journal de Quebec report said Goldbloom stood to earn more than $622,000 in severance pay if he left at the end of his current contract in 2018 — the equivalent of two years' salary and benefits
"It's impossible to explain to the population this kind of arrangement," Education Minister François Blais told reporters at the National Assembly on April 29.
Goldbloom was named principal of the university in the Eastern Townships in 2008. At the time, the English-language university was struggling with enrolment and was running a deficit of close to $10 million.
Robert Hall, the chair of the Board of Governors of Bishop's University, said Goldbloom's decision is an example of the principal's "thoughtful and responsible leadership."