Wales will be at an "economic disadvantage" to other UK nations if it doesn't increase the number of students going to university, according to the sector.
Universities Wales - which represents Wales' nine institutions - said action was needed with latest admissions showing 32% of Welsh 18-year-olds applied to university in January, down a percentage point in a year, and compared with 40.6% across the UK.
Director Amanda Wilkinson said it was possible future generations may be less qualified than those before.
Higher education minister Vikki Howells said the Welsh government wanted to "make it easier for more young people to go to university" if they wanted.