A campus at the University of Ulster may close and departments will be axed at Queen's in Belfast if the cap on tuition fees is retained without new Government funding, the employment and learning minister has warned.
The region's two universities would also have to cut back on undergraduate numbers and would be unable to take on new PhD students if the £40 million a year funding black hole created by keeping fees at the current level is not filled, Stephen Farry told MLAs.
He said there could be dire implications on other sectors within his department as well, with Government-sponsored work apprenticeships potentially ending.
Giving evidence to his Stormont scrutiny committee, the Alliance minister said while many of his political rivals opposed a fee hike, they had not yet pledged to fund the resultant shortfall.
The Department for Employment and Learning (DEL) budget for the coming years is based upon the cap rising from £3,290 to £4,500 a year. The department is currently carrying out a public consultation exercise on a potential increase and Mr Farry is to present an options paper to his executive colleagues within the next month.
Stressing the final decision would have to be taken across the Executive table, he said colleagues had to pay up if they wanted to keep fees down.
"If we are in a situation where we are not increasing fees and this issue isn't addressed collectively by the Executive as a whole, and we are faced with a choice of funding this within the context of the department, this is actually going to be catastrophic for what we are doing," he said.
His stark message to the DEL committee came after bleak warnings by the chiefs of both universities, who have stressed their institutions have already had to absorb a £28 million per year cut in public funding.
The debate in Northern Ireland is taking place as many universities in England have taken advantage of a recent cap increase to raise annual tuition costs to the new maximum of £9,000 a year.
Mr Farry said if fees were not increased, his department alone could not be expected to cover the cost and said it must be carried across government, much like the deferral of water rates.