Tony Abbott blames crossbench senators for the concerns top universities have about the future of the federal government's higher education policy.
While the Group of Eight leading universities still supports fee deregulation, it's worried any version of the policy to pass the Senate will be so watered down it won't meet the original policy intention.
"We support deregulation as an alternative model - that isn't going to happen in this Senate," the group's chief executive Vicki Thomson told AAP on Tuesday.
"In the absence of any solution we need to press the reset button and have a review of the sector."
The group has been among the loudest cheerleaders for the coalition's university sector reform plans.
Mr Abbott says the Group of Eight's concerns are clearly related to the amendments demanded by crossbench senators.
In its two failed attempts to pass the package, the government offered amendments broadly in line with what universities wanted.
"It's important for the Senate crossbench to go back to the Group of Eight and say `well, what can we do to make these reforms as beneficial as possible'," Mr Abbott told reporters in Geelong.
"It's not the government's fault when the Senate crossbench go off on all sorts of tangents."
Crossbenchers Jacqui Lambie, Zhenya (Dio) Wang and Glenn Lazarus are staunchly opposed to deregulation.
The Motoring Enthusiast Party's Ricky Muir moved from supporting the government in December to opposing the bills in March.
Independent Nick Xenophon voted against the bill twice and wants a comprehensive review of regulation, similar to what the Group of Eight has called for.
Ms Thomson said a new review of university and research funding should be de-politicised to remove the animosity towards deregulation.
Universities Australia, the sector's peak body, says despite the Group of Eight's shift support for the government's latest policy iteration hasn't changed.
It wants a short period of consultation to look at the various options to modify the package.
"The bill has been defeated in the Senate twice, but the problem of underfunding will not go away," chief executive Belinda Robinson told AAP.
Education Minister Christopher Pyne points out there have been 33 reviews of higher education since 1950.
He insists the government will push on with the fight for deregulation and not "succumb to paralysis by analysis".
Labor says the Group of Eight's declaration is another embarrassing defeat of Mr Pyne's plans.
"They're just slow learners when it comes to higher education policy," Opposition Leader Bill Shorten said.
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