Vice-chancellors and international student representatives are alarmed over legislation that would give the Home Office the power to introduce visa application charges of up to £500.
The proposals, contained in clause 20 of the asylum and immigration bill, have been condemned as a "tax on entry to the UK" that would deter many overseas students from coming to Britain to study.
Opponents of the clause say it could hamper UK institutions' efforts to increase their share of the multibillion-pound international market at a time when competition from other countries is growing.
David Blunkett, the home secretary, has refused to exclude overseas students from the charges, even though the main aim of the clause is to pass the costs of immigration on to those who benefit from coming to the UK to live and work.
If the government were to act on the powers provided by the bill, ministers have estimated overseas students could be asked to pay anything from £20 to £500 for a visa, in addition to the £36 they already pay.
The plans follow the introduction this year of charges of up to £250 for international students' visa extensions - a move that has already brought protest from institutions and students.
The Home Office said that the power to charge for visas would not be acted upon without consultation. But Clive Saville, chief executive of the UK Council for Overseas Student Affairs, said the government had failed to honour the same promise in the case of visa extension charges.
"For that reason, we are reluctant to accept there is any substance to that promise. The fact is, this would be a tax on entering the UK, and it appears it is being imposed because Mr Blunkett is desperate to raise money for other activities," he said.
Universities UK said it was already concerned about a lack of consultation on the issue. A spokeswoman said: "We are seeking exemption for international students as this additional charge may deter them from coming to the UK."
Cambridge University, one of the UK's biggest recruiters of overseas students, has expressed "deep disquiet" over the plans in a letter to Mr Blunkett that has also been sent to Charles Clarke, the education secretary, and Tony Blair.
The letter warns that the proposed charge will "confirm the view of prospective students that the UK is not a welcoming destination", and will undermine efforts through the Prime Minister's Initiative to attract more overseas students.
The charge would mean the UK would be erecting barriers to access while countries such as Australia, Germany and France are lowering them, it adds.
Home Office minister Baroness Scotland of Asthal said the government did not accept that the taxpayer should fund the visa application service.
She added: "If we were to implement exemptions at reduced fees for students' this would be argued, with some justification, to be unfair to other applicants paying the full fee, some of whom we are equally anxious to attract to the UK."