The Senate has blocked the federal government's proposed deregulation of universities for a second time, after Education Minister Christopher Pyne failed to win over crucial crossbenchers.
But Mr Pyne - who has nominated himself "a fixer" when it comes to education policy - has refused to bow to the upper house, vowing to push ahead with his plan to deregulate fees.
His scaled-back legislation failed 34 to 30 on Tuesday evening, with all but three opposition senators voting down the proposal.
'We will not give up'
The minister has promised to bring the reforms back before parliament, pledging to work with the crossbench and anyone who wanted to be part of a constructive discussion.
"We will not give up. This reform is too important," he said on Tuesday after the vote.
In a failed bid to win sufficient crossbench support, the government decoupled from the bill a 20 per cent funding cut to universities.
Group of Eight Chief Executive Vicki Thomson said it was "disappointing" the Senate voted down the legislation.
"It has been sad and depressing to see a legislative package so crucial to our nation’s future become a political football," she said. "Many Senators acknowledge that the funding of our Universities is not sustainable. Noting this, it is disappointing that the Opposition and the cross benchers still refused to vote for the legislation."
'Defeat a tribute to community action'
But Greens Senator Lee Rhiannon welcomed the move.
"The defeat of the Abbott government Bill for the second time in four months is a tribute to community action. It sends a strong signal to this cruel, out of touch Abbott government," Greens spokesperson for higher education Senator Lee Rhiannon said.
“If the Coalition government was not so arrogant and disconnected from reality, they would have realised that this Bill would have destroyed public higher education in Australia and consigned students to huge debts that would have taken decades to pay off."
The National Tertiary Education Union President Jeannie Rea added: "All Senators who voted against the government’s unfair, unprincipled and unsustainable higher education policies have earned the gratitude of university students, staff and communities; and future students."
The amended legislation would have enabled universities to set their own fees, expanded government funding to private providers and degrees below bachelor level, and abolished loan fees for vocational students.
Mr Pyne also backed away from threats to dump $150 million of science research funding.
Despite the sweeteners, only crossbenchers David Leyonhjelm, Bob Day and John Madigan were convinced to back the reforms.
Crossbencher Jacqui Lambie, who made it out of her hospital bed and into the chamber in time for the vote, said the reforms were purely about the government allowing "their mates" to make more money.
Pyne 'more flexible than a yoga instructor'
Fellow independent senator Nick Xenophon, who taught Mr Pyne at university in Adelaide, warned deregulation could not be easily undone and required very careful consideration.
"Once you have let the deregulation genie out of the bottle, you cannot put it back in," he told parliament. He acknowledged Mr Pyne had been "more flexible than a yoga instructor" but condemned the way the government had gone about trying to push through deregulation.
"This is the biggest, most radical shake up this country has ever seen in terms of higher education," he said.
Senator Madigan believes the bill's flaws could be dealt with and urged senators to do what they were elected to do and consider amending the bill.
The Greens claim under the laws a teacher would graduate with a debt of about $90,000 that would take decades to pay off.
Labor's Kim Carr said the bill would have unleashed a disaster on the Australian higher education system.
"The government continues to stumble blindly towards this disaster regardless of what the Australian people have clearly indicated they do not want," he told parliament.
Senator Carr questioned the political acumen of university vice-chancellors who support fee deregulation.
The government argued the bill would create new opportunities for universities to expand access and excel in a global landscape.
My Pyne maintains the current system is unsustainable.
Universities Australia chief executive Belinda Robinson said the result opened the door for a national discussion on future funding.
A Labor-Green dominated Senate committee on Tuesday recommended the bill be rejected, claiming deregulation was unfair and unpopular.
Higher education policy should centre on the principle of equity, the report said.