Crossbench senators have dashed the government's hopes of passing its university funding overhaul without serious compromises.
Nick Xenophon says his team cannot support the measures as they stand while independent Derryn Hinch predicts they won't pass without changes.
Nevertheless, Education Minister Simon Birmingham is hopeful of reaching a deal soon.
The package includes cutting university funding in 2018 and 2019, increasing student fees, lowering the repayment threshold for HECS-HELP student loans and tying a portion of funding to performance measures.
The higher education sector opposes the package, which it says will cut $2.8 billion over the next four years and leave students paying more for less.
Labor and the Greens have followed suit, leaving the government to rely on crossbench votes in the Senate where it next heads.
The bill cleared the lower house on Wednesday night after the government gagged debate.
Senator Xenophon believes the legislation needs to grapple with the differences in demand and supply of skills and not continue the siloing of university and vocational education.
NXT education spokeswoman Rebekha Sharkie said there were some "small, good measures" but also a "blunt and deep cut" that will mean job losses in the sector and higher costs to students.
She said she cannot support increasing student contributions, noting that Australia already has the fifth highest tuition fees in the OECD.
"The government is asking Australian students to shoulder even more of the burden," Ms Sharkie told parliament during debate on Wednesday.
"Nearly 80 per cent of students enrolled in a bachelor's degree are young people and we are asking them pay more to get less."
Senator Hinch has "some major worries" about aspects of the package, including the proposal to make graduates start repaying loans when their income hits $42,000 - down from nearly $56,000 at the moment.
He's hoping for a compromise level of $50,000.
Senator Birmingham wasn't put off by the tough task.
"The Senate's always a balancing act," he told reporters.
"But we've pragmatically dealt with them successfully as a government since last year's election and I am confident we will be able to continue to do so and hopefully will get a result in relation to higher education."
