The Council of Trade Unions (CTU) says a bill that has passed its first reading in parliament threatens student welfare.
The bill, drafted by Act MP Sir Roger Douglas, makes sure students don't have to join an association.
"There is one group of individuals that is still forced to join an association, one group of individuals whose money is forcefully taken in order to fund the association they are forced to join," he said.
"Every year, individuals around this country are compelled to join the student association when they sign up to their tertiary institution."
Current law requires councils to conduct a referendum to decide whether membership of an association should be compulsory, if a referendum is petitioned by 10% of enrolled students.
The decision is then reached on a majority vote of those taking part in a referendum.
CTU president Helen Kelly said the bill guaranteed the loss of essential student support services.
"Student associations provide critical services such as student loan advice, welfare support, advocacy services, sporting and cultural clubs and facilities that are all essential for student welfare," she said.
"The loss of these services would be incalculable."
Education Minister Anne Tolley said National was supporting the bill on its first reading so it could go to a select committee for public submissions.
"Current law does not allow students to make their own decisions about union membership - the only group in society that is denied this basic freedom," she said.
"Most organisations have to demonstrate their value and their competence in order to justify support."
Tolley said if associations could prove they provided beneficial services, then students would join them voluntarily.
Labour opposed the bill and MP Chris Hipkins said students already had a choice through the referendum system.
"This bill is designed to silence critics of the government," he said.
Hipkins said associations provided valuable advocacy and welfare services at much lower cost that institutions could because the work that went into the services was voluntary.
He predicted there would be a massive increase in levies if the bill was passed.
The Education (Freedom of Association) Amendment Bill changes the law so students can't be compelled to join an association.
Sir Roger said he had nothing against student associations.
"If you want to group together and advocate for nutty policies, go for it. The Greens are doing alright," he said.
"If you want to provide services to your members, go for it. If student associations really do such an amazing job, then students will join them. But they should not be compelled to."
The bill passed its first reading 64-58 on Wednesday. Labour, the Greens and the Maori Party opposed it.
It has been sent to the education and science select committee.