Universities warn they will suffer "severe" financial strain and will find it hard to deliver a high standard of education after the federal government said it would strip $2.3 billion from the tertiary education sector.

Tertiary Education Minister Craig Emerson, who made the announcement in Canberra on Saturday, said Labor had found three "substantial savings" that would help free up money to fund its school reform measures, which were recommended by the Gonski review.

The measures, which will deliver more than $2 billion of savings, would also ensure the fiscal position of the federal budget was sustainable over the long-term.

But Universities Australia, the peak body representing the sector, said the funding cut was the largest since 1996 and would "place severe strain on a sector that has been encouraged to expand enrolments".

The magnitude of the cuts made to the sector over the past six months would also challenge the ability of universities to continue to meet a high standard of education, Universities Australia chair Glyn Davis said in a statement.