Clive Palmer has backed away from his earlier suggestions his party could back the federal government's higher education reforms which would uncap fees and increase the cost of student loans.

The votes of the Palmer United Party senators are critical for the legislation's future because Labor and the Greens are combining to oppose the government's changes, first announced in the May budget.

Mr Palmer said on Monday that he was open to supporting the government's changes if it meant the higher fees funded an expansion of student scholarships.

Sydney University is promising to offer a third of its undergraduate students scholarships to cope with living costs, if the cost of a degree is left up to tertiary institutions to decide.