Businesses and research funding could be caught in the mire as the federal government looks to trim international student numbers.
In an attempt to reduce migration to pre-COVID-19 pandemic levels, the federal government has revealed it wants to cap the number of overseas students arriving in Australia at 270,000 in 2025.
The $48 billion international education sector supports about 250,000 jobs across the country.
Foreign student fees are about three times higher than domestic fees and help fund university research, teaching and low-income support.
A limit on these students would "apply a handbrake" to one of the nation's biggest exports, Universities Australia chair David Lloyd said.
"We acknowledge the government's right to control migration numbers but this should not be done at the expense of any one sector," Professor Lloyd said.
"Having fewer students here will only widen the funding gap at a time universities need greater support.
"There will also be significant flow-on effects for other sectors of the economy that rely heavily on international students."
The government wants to halve overseas net migration after the figure peaked at 500,000 in 2022/23.
Education Minister Jason Clare said there were roughly 10 per cent more international students in universities than there were pre-pandemic and 50 per cent more in privately run education and training providers.
If the government's legislation passes parliament, the cap will allow for 145,000 enrolments at public universities, 95,000 foreign student commencements in the vocational education and training (VET) sector, and 30,000 places at other universities and providers.
"Students are back, but so are the shonks - people that are seeking to exploit this industry to make a quick buck," he told reporters in Sydney on Tuesday.
"What (the cap) means for universities is that they will have roughly the same number of students starting next year as they did last year for the entire sector."
The government has already instituted a "de facto limit setter" on student visas through ministerial direction 107.
Some in the sector have claimed it favours affluent students who attend inner-city universities, while impacting regional institutions with a more diverse student base.
Mr Clare confirmed ministerial direction 107 will be replaced by the new cap when it passes parliament, a move which has been welcomed by La Trobe University.
The federal government has outlined the number of foreign students each university can take and will work with them to finalise the 2025 levels.
Group of Eight chief executive Vicki Thomson, who represents Australia's most research-intensive universities, has condemned the caps.
"The government has essentially responded to one reckless policy folly, ministerial direction 107, with another - punishing the universities that have proven to be the most popular for the very best global students," she said.
These limits have been branded a "knee-jerk" reaction to the housing crisis by the Business Council of Australia, with its chief executive Bran Black warning the move will have unintended consequences on economic growth and Australia's reputation.
"Many international students have already accepted enrolments at Australian universities and will have to be turned away following this decision, which will cause long-term damage to our reputation as a sought-after destination for international education," he said.
The Independent Tertiary Education Council Australia says the caps creates more questions than answers, while the National Tertiary Education Union has called on the government to guarantee it will not result in job losses.
Greens senator Mehreen Faruqi says the government's cap puts migrants and international students "in the firing line" and urged politicians to increase university funding.
