Universities can start collecting the fee from July and, in return, will have to comply with government benchmarks on the type and quality of non-academic services they provide. To soften the impact on students and parents, the Government will provide HECS-style student loans to cover the fee, and repayment will be deferred until students enter the workforce.

But in the most contentious element of the scheme, the $250 fee will also be used to fund student representation and advocacy on campus. Critics will argue this is a new form of compulsory student unionism. The National Union of Students welcomed the plan last night but called for the funds to be directed to campus student organisations rather than be controlled by university administrations. Voluntary student unionism, introduced in 2006, barred universities from imposing compulsory fees for non-academic activities including membership of student associations and unions. The compulsory fees had ranged from $100 to $600.

Ms Ellis says the ban stripped $170 million out of university funding and, in some cases, forced the closure of vital health, counselling, employment, assault, child care and welfare services. A government review found many universities had since dipped into funds for academic work or raised the price of food and drinks to pay for services.

"As promised at the last election, the Rudd Government has delivered a balanced, practical solution to rebuild important student support services and amenities," she said. Universities would still be prohibited from requiring students to be members of student organisations, she said. The national president of the The National Union of Students, Angus McFarland, said: "If you are going to charge students, the best people to provide the services are the student bodies because they are more aware of the quality of student services than middle-aged bureaucrats." Ms Ellis said the fee would be capped at $250 but adjusted each year by an indexation formula.

The new funding is likely to cover food and drinks, meeting rooms, sports and recreation, child care, counselling, health care, legal advice, housing, employment, arts, debating, student newspapers and overseas student support. A spokesman for Ms Ellis said any student representation to be funded would not allow partisan political activities. Winning Senate approval could be made easier by the Nationals' Senate leader Barnaby Joyce, who opposed voluntary student unionism because of the impact on regional universities.