Australian universities have experienced steep declines in numbers of applications from home and international students.
A drop in foreign application numbers has led to job losses at some universities while others are struggling to fill government-set quotas of home undergraduates.
Critics see the 2004 decision to allow universities to increase Higher Education Contribution Scheme charges by 25 per cent as a serious deterrent.
University students and recent graduates owe more than A$11 billion (£4.7 billion) in deferred tuition fees under the Hecs scheme. Rising debt levels are thought by some to be deterring potential students. But Brendan Nelson, the Education Minister, has argued that a strong economy and low unemployment is causing many to seek work instead.
The drop in domestic enrolment last year was the second in more than 50 years. With fewer applications from students for 2006, the number of Australians undertaking university degrees is likely to shrink again, with smaller and regional institutions hardest hit.
Despite the decline, a large number of students continue to miss out on a place. The Australian Vice-Chancellors' Committee estimated that unmet demand for university places fell by nearly 5 per cent between 2004 and 2005, yet nearly 20,000 Australians eligible to enrol in a university failed to receive an offer last year.
That number will almost certainly shrink because of the fall-off in interest. In Western Australia, applications from local students fell by 8 per cent on 2005 after a drop of 10 per cent the previous year.
Universities in Victoria have seen an overall fall of more than 7 per cent in the past two years while applications in New South Wales have declined 1 per cent this year, leaving some 800 courses with vacancies.
Universities that do not fill the number of undergraduate places allocated by the education department lose federal funding. Central Queensland University, where foreign students make up nearly half of the total onshore enrolments, has fallen short of its target by nearly 500 domestic places at an estimated cost of A$4 million.
To try to meet their quota, universities are lowering the tertiary entry score students must achieve at school to be accepted.
Whereas older and more prestigious universities such as Melbourne, Monash, Sydney and New South Wales require Tertiary Entrance Rank percentile scores in the high 90s for many courses, many suburban and country institutions have been forced to lower their requirements to scores in the 50s.
Dr Nelson claimed last year that admitting students with low scores was a threat to academic standards and was likely to increase the dropout rate.