Plans to charge English, Welsh and Scottish students higher fees than their Northern Ireland counterparts studying at universities here have been thrown into doubt.
Stormont hopes to follow Scotland's lead in charging non-domiciled students more than locals.
The move, backed by Minister for Employment and Learning Stephen Farry, would help address a £40m shortfall in his department's budget.
However, a legal challenge against the Scottish Executive, which is planning to charge fees of up to £9,000 for students from England, Wales and Northern Ireland while having no fees for Scottish students, could force a rethink on any new fees structure here.
If the case succeeds and they are forced to charge all UK students the same amount, it would put pressure on the minister's already strained budget.
"We will be keeping a close eye on this case," Mr Farry said. "I have asked my officials if we can stand over our plans. Our legal advice is that we can charge differential fees but advice is only advice until the matter is tested in court and you have rulings.
"If that happens we will have to consider whether we can afford to take measures similar to Scotland. I was speaking to the Scots back in June and they seem pretty confident that they can stand over it."
Basil McCrea, chairman of Stormont's employment and learning committee, believes any changes to the current system are risky.
Mr McCrea said: "I feel we are vulnerable to a challenge if we discriminate against other regions of the UK.
"There is a legal and moral case to answer here."
But Mr Farry fears that if the status quo remains, local students could be crowded out of Northern Ireland universities from 2012, when new university fee arrangements are introduced.
Phil Shiner, a solicitor with Public Interest Lawyers, claims that Scotland, and Stormont by extension, may have misinterpreted EU Human Rights law when they claimed to have found a loophole allowing them to discriminate against other UK regions. He is collecting evidence for a possible action against the Scottish Executive.