Ulster University's business plan for the expansion of its Magee campus is out of date and needs to be resubmitted, a senior civil servant has told Stormont's Economy Committee.
Heather Cousins, deputy secretary of the Skills and Education Group at the department, said the costs of delivering 9,400 students for Magee in UU's original plan was £300m capital and £100M resources but this was money the Department does not have.
As a result campaigners have called for an independent university in Londonderry to take the project out of UU's hands.
Garbhan Downey from the Derry University Group said: "Clearly the Ulster University is not the best body to expand Magee because instead of going and asking the money to expand Magee, they asked the Department for the Economy for £100m to put down a debt.
"The government's priority as stated in the New Decade, New Deal is the Derry expansion not Belfast university.
"Ulster University should return the grounds and the budget at Magee immediately and concentrate on what it wants to do, which is build its Belfast site."
Foyle MLA and deputy chairwoman of the Economy Committee Sinead McLaughlin said if Ulster University does not demonstrate its commitment to Derry, another body could be considered.
"There are a number of courses that are about to move out of Jordanstown campus and we need UU to say that the place they are putting those students into is Derry," she said.
"If they fail to do that then there might be another conversation.
"As a result of the New Decade, New Approach deal there is an intention on the new government to support the wider expansion of Magee.
"In order to ensure that that happens, there needs to be instructions from the department down to the civil servants that this has to be done."
Ulster University has yet to respond to a request for comment.