Universities and students can be certain about their funding for 2016 after Education Minister Simon Birmingham delayed fee deregulation for at least a year.
Acting opposition leader Tanya Plibersek said she was pleased with the one-year reprieve but said the government should dump its plans entirely.
"They haven't worked out that it's a mistake to introduce $100,000 university degrees, all they've said is it's too late this year to do it," she told reporters in Sydney.
Mr Birmingham has indicated he is rethinking all aspects of a package to overhaul higher education that has so far been rejected twice in the Senate.
"With only three months left in 2015, it is necessary to give both universities and students certainty about what the higher education funding arrangements for 2016 will be," Senator Birmingham told an audience at the University of Melbourne on Thursday.
"Any future reforms, should they be legislated, would not commence until 2017 at the earliest."
Existing arrangements, with indexed funding, will continue for the next year.
Previous education minister Christopher Pyne unveiled the changes in the 2014 budget.
They included a deregulation of fees, an expansion of government funding to private providers and degrees below bachelor level, a 20 per cent cut to federal per-student funding and the dumping of loan fees for vocational students.
It was all supposed to start on January 2016.
After the Senate rejected the package for a second time in March, Mr Pyne insisted he would again put it to parliament before the end of the year.
Now Senator Birmingham says that won't happen.
He will use the extra time to consult with the higher education sector, students, employers and Senate crossbenchers.
The government's challenge was to make sure future funding of higher education was sustainable while still letting universities enrol as many undergraduate students as they wanted and keeping a high quality, accessible system.
"To those who claim consideration of reform is about ideology or privilege, you are dead wrong," Senator Birmingham said.
"I will only ever champion reforms that achieve both equity and excellence."
Tasmanian university students welcomed the minister's decision, and have called on the government to heed the views of students before making future plans.
Tasmanian University Union president Heidi La Paglia thanked Labor, Greens and crossbench senators for standing strong against the legislation in the upper house.
"This should be a lesson to the goverment that legislation is not successful if it does not have the support of all stakeholders," she said in a statement.
Former prime minister Tony Abbott said while he was disappointed in the delay, it was understandable given the political realities of the Senate's opposition.
The package had been the centrepiece of "a brave, reforming budget" in 2014 and was still needed, he told 3AW radio.
