Over 80 per cent of respondents to market research commissioned by the federal government mistakenly believed that up-front university fees were being reintroduced as part of proposed higher education changes.
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Education Department officials told Senate estimates hearings on Wednesday that a controversial $15 million advertising campaign explaining the government's reforms was launched after research uncovered widespread misconceptions about the higher education system.
The government has proposed allowing universities to set their own fees but would retain the HECS system in which students only repay their loans when they start earning approximately $50,000.
The release of the research findings came as department officials on Wednesday refused to release internal modelling of fee rises under a deregulated system, with a senior bureaucrat saying any fee estimates had been "essentially invented by departmental officials".
"In each case, while presented as assumed facts and informed by departmental analysis and research, these figures were essentially invented by departmental officials for the purpose of providing material for analysis based on assumed patterns of behaviour," department associate secretary Robert Griew said in a statement to the Administrative Appeals Tribunal.
Mr Griew said releasing the fee estimates could dampen "genuine price competition" between universities.
Education Department Secretary Lisa Paul said research conducted in late 2014 by Orima Research found a "fundamental misunderstanding" among potential students about both the current HECS system and the government's proposed changes.
"Eighty-one per cent of respondents were unaware that the HECS-HELP scheme was remaining in place," Ms Paul said.
This backed up misunderstandings among students at university open days across the country, she said.
Assistant Education Minister Simon Birmingham accused Labor and the Greens of fanning misinformation about the reforms by claiming, among other things, that families would have to take out a second mortgage to support their children through university if fees were deregulated.
Labor and Greens Senators on the committee said they had never claimed up-front fees were being reintroduced.
Independent senator Xenophon has slammed the government's advertising campaign as "party political advertising" and Palmer United Party Senator Glenn Lazarus declared it "propaganda".
Department officials also revealed that a hotline set up to answer questions about the reforms had received 135 calls since it was set up.
