The University of Wollongong could have its brighter students poached by wealthier colleges with more scholarship dollars under incoming higher education reforms, the opposition has warned.
A cap on the fees universities can charge students will be lifted from 2016 as part of a suite of changes announced by the Abbott government in the May budget.
The move has been welcomed by many universities, including those from Australia's prestigious Group of Eight, as a measure that will make them more competitive.
But opposition assistant education spokeswoman Amanda Rishworth, in Wollongong on Monday for a forum opposing the changes, warned deregulation would create a "two-tiered system" in which more prestigious universities could charge $100,000-$200,000 for degrees and, with this extra income, offer more scholarships to students who might have otherwise attended regional universities such as Wollongong.
"While fees at UOW will increase, they will not necessarily increase to $100,000-$200,000, like at the University of Melbourne," Ms Rishworth said. "The University of Melbourne will be able to skim off a lot more money [to create scholarships] and actually poach students from around the rest of the country, whereas normally those students would choose their local university.
"And it's a misnomer to call them 'Commonwealth scholarships' because they are [funded] using money out of the extra fees that students are charged."
A spokesman for Education Minister Christopher Pyne defended the scholarship arrangements, saying they would create opportunity for the brightest students.
As part of the package, the federal government plans to extend Commonwealth Supported Places to 80,000 students doing diplomas and associate degrees at TAFEs and private colleges.
The change means students who currently pay full fees will now have part of the cost of their course covered by the Commonwealth, at a cost of $820 million over three years.
"It appears Labor is now suggesting that the brightest students shouldn't have the opportunity to access scholarships to attend universities," the spokesman said.
"Labor has completely tied itself up in knots.
"They are opposed to the biggest Commonwealth Scholarship program in Australia's history that will allow the smartest students to attend the university of their choice, they are opposed to expanding the demand driven system to sub-bachelor degrees like diplomas and pathway courses."
Monday's forum attracted about 40 people for discussion with Illawarra MPs and union figures.