The Abbott government has hit a brick wall in the Senate, which has voted down the Coalition’s plans to deregulate university fees for a second time.

Labor and the Greens were joined by several crossbench senators on Tuesday night to defeat the bill 34 votes to 30.

Education Minister Christopher Pyne released a statement on Tuesday night saying he will take this package of reforms back to Parliament because higher education is “too important”.

• ‘I’ll never give up on uni reforms’: Christopher Pyne
• ‘F’ for fail: Pyne reforms slammed by Senate
• Pyne splits university bill

On Monday Mr Pyne announced he would split the original legislation, sidelining a $1.9 billion funding cut to course fees which he said would be considered “at a later time”.

Mr Pyne also backed down on his threat to withdraw $150 million for research unless the Senate passed the higher education package, declaring it had been a “distraction”.

But the move failed to sway key crossbenchers who said they remained opposed to university deregulation.

Independent Senator Nick Xenophon voted against the bill. Photo: AAP

The Government needed the support of six out of the eight crossbench senators to pass its legislation through the Upper House, but failed to achieve that.

Independent senators Nick Xenophon, Jacqui Lambie and Glenn Lazarus, Ricky Muir from the Motoring Enthusiasts Party, and Palmer United Party senator Dio Wang opposed the Higher Education and Research Reform Bill.

Family First senator Bob Day supported the bill, along with Liberal Democrat David Leyonhjelm.

Independent senator John Madigan also voted in favour of the bill but made it clear he wanted it to progress so that it could be amended.

“I have serious concerns with the bill in its current form, but I also fear the consequences of doing nothing,” he told the Senate.

But Liberal MP Steven Ciobo said the Coalition would continue to drive the legislation.

“What it comes down to is the Labor Party refusing to budge,” Mr Ciobo told Sky News after the vote on Tuesday night.

“It’s looking at what we can do to Australian institutions to make them the best in the world and give the next generation of Australians the best education they can have.”

Labor’s Kim Carr said the bill would have unleashed a disaster on the Australian higher education system.

“The government continues to stumble blindly towards this disaster regardless of what the Australian people have clearly indicated they do not want,” Mr Carr said.

He questioned the political acumen of university vice-chancellors who support fee deregulation.

Senator Jacqui Lambie criticised both Labor and the Coalition for cutting funding to universities in recent years. Photo: AAP

Mr Xenophon said everyone agreed the system of university funding needed to change.

“I don’t, however, believe that deregulation is necessarily to best option in solving this problem,” he said.

“I cannot accept what the Federal Government is doing. I cannot support it.”

Mr Xenophon said he welcomed the Government’s recent changes to the legislation as a sign of willingness to listen and compromise.

“(Education) Minister Pyne is incredibly flexible,” he said.

“More flexible than a yoga instructor, I think sometimes.”

However, Assistant Education Minister Simon Birmingham told senators the Coalition’s proposal was the best option on the table.

“The higher education system must be adequately funded to ensure quality and sustainability, and the deregulation of fees provides the most realistic way to do this,” he said.

Some of the Coalition’s opponents called for more public spending on tertiary education.

Greens leader Christine Milne told the Senate that changes to taxation of superannuation and fuel could help fund education.

Senator Lambie criticised both Labor and the Coalition for cutting funding to universities in recent years, but was particularly scathing of the current Government.

Wait. I thought he #FixedIt? “@newscomauHQ: University fee reform bid crushed in Senate http://t.co/AusH4zH5HE pic.twitter.com/KRSNdmhDuk”

— Dame La-di-dah (@kerrynwoods) March 17, 2015

After the failure of the higher education reforms today for the 2nd time, it’s time for the university sector to rethink and regroup. — Andrew Dempster (@admpstr) March 17, 2015

@SenatorLudlam @davidbewart If I was there I’d shout you all a drink. Thank you! Love from a university teacher x

— Deborah (@Prufrockery) March 17, 2015

– with ABC