''Fees will go up and they will go up quite significantly,'' Professor Chapman, director of policy impact at the Australian National University, said. 'Fees will go up and they will go up quite significantly.': Bruce Chapman. Credit:Glenn Hunt ''I expect most universities will increase tuition fees to international student fee levels, which are currently about three times higher. The Group of Eight universities will do that pretty quickly. ''Past changes to HECS didn't deter students from entering university, but now that there will be a real rate of interest on the debt we are in uncharted waters.'' Professor Chapman said it was plausible the cost of a bachelor of medical science would rise from $24,000 to $120,000 – the fee for international students at the University of Sydney.

''The idea fees will go down anywhere is frankly fantasy land,'' he said. Professor Chapman said the government's plan for students to pay interest on loans up to 6 per cent - depending on the government bond rate - was unfair. Students who drop out of university and start out in low-paying jobs would be the hardest hit, he said. So would women who delay paying back their debts when they take time off work after having children. Interest on student debt has been pegged to inflation – now 2.9 per cent – since the introduction of HECS. A $40,000 debt unpaid for 10 years would grow to $58,933 at an interest rate of 4.4 per cent. Universities Australia chief executive Belinda Robinson said: ''We will definitely see a major shake-up of the sector with some universities charging substantially higher degrees for some courses.''

Ms Robinson said she was concerned dramatic increases in fees could deter students from entering university, throwing the viability of some universities into doubt. Fee deregulation has split the university sector, with sandstone universities strongly in favour while many technical and suburban universities are opposed to the policy. University of Western Sydney vice-chancellor Barney Glover said he was concerned fee deregulation would hurt the economic development of western Sydney. ''UWS is particularly concerned that this will place additional financial burdens on students, and it will be important to determine if this acts as a deterrent to university study,'' he said. ''This could have further implications for national productivity and regional development at a time when Australia and western Sydney face considerable economic and labour market challenges.''

Chairman of the Group of Eight universities Ian Young said the government's other major higher education initiative – the extension of Commonwealth support to TAFEs and private colleges – will place downward pressure on fees. ''If universities want to charge a premium, they will have to convince students there is a real benefit to what they offer,'' he said. "This will keep us on our toes and force us to innovate." The requirement for universities to spend 20 per cent of extra fee revenue on scholarships for low-income students addresses equity concerns, he said. Education Minister Christopher Pyne said increased fees are justified by the higher salaries university graduates earn. ''The prices might go up or they might go down through competition,'' he told Sky News on Wednesday.

''People might be surprised how much effect competition has on reducing prices. Let's see how the market reacts from 2016 onwards.'' University of NSW acting vice-chancellor Iain Martin said fee deregulation was essential and the alternative would have led to an ''inevitable decline in the international reputation of our universities''. Loading Grattan Institute higher education program director Andrew Norton said fees will increase but claims of $30,000 annual fees becoming the norm were overblown. Follow us on Twitter