Education experts fear re-capping the number of students universities can take could drive quality down and leave Australia lacking the high-skilled workers it needs.
Education Minister Christopher Pyne has made reviewing the demand-driven system for university places a high priority.
He also wants to scrap the student services and amenities fee Labor instituted in 2011 and abandon some equity targets.
Under the demand-driven system, which started in 2012, universities get federal funding to support an unlimited number of undergraduate students.
Mr Pyne is concerned exponential growth in student numbers could impact quality, but the tertiary education sector says it's too early to tell.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
"We're yet to even see the graduates of the demand-driven system, so to be drawing conclusions around quality is probably just a little premature," Universities Australia chief executive Belinda Robinson told AAP.
She noted Mr Pyne had only talked about reviewing the system, not reinstating caps.
Universities need to take on more students to meet Australia's growing need for highly skilled graduates, Ms Robinson said.
Grattan Institute higher education program director Andrew Norton said should there be a return to the capped system it would affect all students, not just those excluded from study, and make higher education less fair and less productive.
The open system meant universities had to improve to compete.
"Universities have actually been, in most areas, realigning what they offer to what students actually want to do," Mr Norton told AAP.
"There's a much stronger penalty now for universities that don't do a good job with the students they do get."
He said dumping equity targets would have little effect because there weren't specific policies in place aimed at meeting them.
Acting Labor leader Chris Bowen rejected the idea that taking more students lessened quality.
"What the government is trying to do here is to set up an excuse to cut university funding," he told reporters in Sydney.
"If you abolish the demand-driven system, you are cutting university funding."
The plan to get rid of the compulsory student services fee has surprised few.
The coalition opposed its introduction, but many in the sector say other cuts mean universities won't have the money to fund services themselves.
