"I've suggested that HECS debts should be frozen for five years for primary caregivers. Debts continuing to accrue interest while people are out of the workforce will have a nobbling effect on families with young children." Mr Madigan welcomed signals from Mr Pyne that he will abandon plans to peg student debts to the long-term government bond rate, rather than inflation, but said the government should go further. Independent South Australian Senator Nick Xenophon praised Mr Madigan's proposal as the type of "lateral thinking" that will be needed to strike a deal on university reform. Senators Madigan and Xenophon told Fairfax Media they have serious concerns about fee deregulation but intense lobbying from the university sector has convinced them the current funding system is unsustainable. With Labor and the Greens opposed to fee deregulation, the government will need the support of six of the eight Senate crossbenchers to pass its reforms. "Universities have been hit by funding cuts from both sides. They are starved of cash and need to be more viable," Senator Xenophon said.

"I can see why they want fee deregulation but I am wary of unintended consequences. "I don't want to see the Americanisation of our universities where people are reluctant to take on lots of debt." Asked about negotiations with Mr Pyne, Senator Xenophon said: "He is as frustrating and enigmatic as he was when I lectured him at the University of South Australia 25 years ago." Senator Xenophon said the government had gone about reform in an "awful" way by announcing a complicated set of reforms in the May budget. Senator Madigan said: "I'm very reticent on fee deregulation at this point of time. I don't want to see families saddled with debts that will be higher than Ayers Rock to climb over.

"What the government is putting forward I wouldn't accept – there would need to be a lot more safeguards put in place for me to consider supporting it." Mr Madigan, from Ballarat, said he was particularly concerned about the impact of the government's policies on regional universities. But he acknowledged that "no legislation is perfect" and he is open to a package that "ticks most of the boxes". "There is no doubt that something has to be done but it has to be done in a considered manner," he said. A spokesman for Mr Pyne said the package "represents essential reform that will expand opportunity for students and ensure our universities are sustainable and competitive internationally into the future.

As the Government has indicated on many occasions, this will inevitably involve negotiations with the cross benches as the Coalition does not have a majority in the Senate." Mr Pyne said on the weekend he was prepared to negotiate into the new year to strike a deal on higher education reform. "Timelines can always be shifted and I'm not going to be hidebound by timing schedules," Mr Pyne said. "What I want is an outcome for students and universities. That is a more important result than [meeting] timelines and schedules." Clive Palmer and Palmer United Party Senator Jacqui Lambie have said the party will oppose fee deregulation. But previous PUP backflips on climate policy, financial planning laws and the mining tax have fuelled government hopes that the party could do a deal on higher education. Correction: An earlier version of this story incorrectly reported that Senator Xenophon lectured Mr Pyne at the University of Adelaide 25 years ago. The lectures were in fact at what is now known as the University of South Australia.