Regional and rural universities will be hardest hit by the government's decision not to boost funding to the sector, according to the president of the University of Wollongong's student union.
The federal government said on Monday it would not be making a general increase to university base funding, despite an independent review it commissioned recommending it do so.
Wollongong Undergraduate Students Association (WUSA) president Sam Dixon said regional universities would be disproportionately affected by the announcement.
"The government should be investing in the nation's universities as a priority - in particular in regional universities which always struggle with funding and in getting students to campus," she said.
"More funding is needed to ensure services at these universities is not of a lower standard than at metropolitan universities."
Ms Dixon said the student union did, however, welcome the government's decision to not increase student contributions.
A recommendation from the review, led by Jane Lomax-Smith, was that all students pay 40 per cent of their course costs, with the Commonwealth providing the balance.
The review panel said the existing system, under which student contributions range between 19 and 85 per cent, was inequitable - however, the government ruled out increasing any student contributions.
"We are impressed with the government's decision not to increase student fees. We believe the government should be subsidising tertiary education and that it should ultimately be free to students," Ms Dixon said.
Tertiary Education Minister Chris Evans responded to the 2011 funding review by pointing to the "unprecedented investment" Labor had made in universities since 2007.
He cited an Ernst & Young report which found last year that funding per student place had increased by 10 per cent as a result of Labor's increased investment.
National Union of Students president Jade Tyrrell said she was disappointed that these funding increases had been used to justify rejecting a further boost.
She also had concerns that smaller, rural and regional universities would suffer most.
"There needs to be more initiatives to ensure students do receive more support and that rural and regional universities aren't starved of funding overall," Ms Tyrell said.