Critics contend the drop in applications is due to a hike in fees that has tripled tuition costs at many universities, The Daily Telegraph reported.
Some 30,000 fewer students are registered for the new school year that starts in October. Tuition for classes is now higher, about $14,600 a year.
Nearly 27,000 courses still have vacancies. The last day to apply for admission is Sept. 20
The British admission service said nearly 50,000 fewer students applied for admission this year than in 2011.
The drop in the number of applications also may show a declining level of academic success in the country's secondary schools.
Following a drive to make exams harder, some 5,000 fewer students had the minimum two As and a B necessary for entry into many courses at leading institutions, said David Willetts, the universities minister.
He called the decline a "temporary jolt" brought on by changes in educational policy.
Sally Hunt, the general secretary of the University and College Union, blamed the drop on "the predictable failure of the government's attempt to create an artificial market for the most highly-qualified students."
Unfilled seats means universities could lose $1.1 billion over the next three years.
2014: The Year in Music [PHOTOS]