In some popular courses like law and medicine, fee-paying students can be admitted at some universities.
The government is reportedly considering a proposal to expand fee-paying places further to offset a lack of demand for government places in other disciplines.
But Rose Jackson, from the National Union of Students, says this could end up reducing government-funded places.
Ms Jackson says under existing rules, universities face severe penalties if they admit fee-paying students before they have filled government-funded places across a given faculty.
"The Government's going to change all of that, so that unis can pack popular courses like law and medicine and business with full-fee students while other courses - particularly courses that represent areas of skills shortage within Australia, like teaching and nursing - languish and remain empty, with no students enrolled in them."
A spokesman for the federal Education Minister, Julie Bishop, says the move won't affect the total number of government-funded places.