Students from England, Scotland and Northern Ireland could take legal action over top-up fees charged by Welsh universities, it is claimed.
Welsh students will not have to pay the £3,000 at colleges in Wales under a new deal agreed by assembly members.
But Brian Morgan of Cardiff Business School said students from the rest of the UK might challenge the system.
First Minister Rhodri Morgan said it was workable and universities would be "immensely relieved".
On Wednesday, AMs voted unanimously for a system which will exempt students from Wales from top-up fees.
However, Labour members expressed their concern that the policy does not target the most disadvantaged students.
The Labour assembly government came to a deal with Plaid Cymru, Conservatives and Liberal Democrats after the opposition parties earlier blocked an increase in tuition fees.
It means Welsh universities can charge £3,000, but students living in Wales will pay only £1,200, and the rest will come from the assembly government.
Students from other parts of the UK will pay the full £3,000. Welsh students who go to colleges over the border will also usually pay £3,000 - although they will be subsidised for some courses, such as veterinary science, which are not available in Wales.
Brian Morgan criticised the deal as "subsidising the better off" and said it was open to legal action.
'Immensely relieved'
"An English student could challenge why he or she is paying more money than everybody else, and what are we going to do then?
Welsh students may be subsidised for courses unavailable in Wales
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"It is patently not a long term fair proposal for everybody and therefore it is open to challenge."
He also questioned whether it would discourage Welsh students from leaving for top universities elsewhere.
"Yes, we have got good universities, but we should be encouraging our students to get as wide an experience as possible. And the point here is that it's not just Welsh students who will be getting access to this money - it will be other European students.
"It's not at all obvious what we will gain from that end of the proposal."
First Minister Rhodri Morgan said the assembly government would have to be sensible on budgeting the scheme.
"They'll be breaking open the bubbly because it will be like the relief of Mafeking to them," he told BBC Radio Wales.
He said colleges and students needed certainty for courses starting from 2006.
Attractive bursary packages
"Maybe none of us get exactly what we want, we wouldn't have designed the system exactly this way, but a deal's a deal," he said.
The first minister said there would also be very attractive bursary packages to encourage people into university from working class areas.
Professor Richard Davies, vice-chancellor of Swansea University, said it was good news for higher education, students and Wales.
About 62% of Welsh students are currently from Wales, and Prof Davies forecast that that would rise because of the financial advantages.
Some 95% of students at English universities were from England and he said: "We don't talk about that as being parochial or too limiting for English students."
Prof Davies said Wales would also attract more students from outside the UK, and they would "enrich everybody's experience".
"We do want students from all over the world. We often say that students learn as much outside the lecture theatre as inside."