He has launched a consultation to try to find agreement on how universities should be paid for.
The consultation has been called the 'Big Conversation'.
Speaking in the assembly, Mr Farry said that Northern Ireland was the only part of the UK actively "disinvesting" in higher education.
The consultation process will involve a number of events and online presentations in order to seek opinion from students, university staff, unions and the wider public.
Just under 40% of funding for Queen's University, Belfast (QUB) and Ulster University comes directly from Stormont's Department for Employment and Learning (DEL).
However, the universities faced cuts of more than £16m in funding from DEL in 2015/16, which followed cuts in funding during previous years.
Ulster University is shedding about 200 jobs in 2015/16 and 1,200 student places over the next three years, while Queen's University announced in April that it was cutting 236 jobs in 2015/16 and 1,010 student places over the next three years.
Ulster University also closed a number of courses and departments including their School of Modern Languages at Coleraine, County Londonderry.
The universities also draw about 30% of their annual funding from student tuition fees, which are currently £3,805 per year for students from Northern Ireland.
Some students also study for degrees at further education colleges, and that budget was also reduced this year by about £12m.
DEL's budget was reduced by £62m earlier this year, and its budget for higher education institutions fell from £203m to £186m, a reduction of 8.2%.
Mr Farry said that, given its importance to the local economy and the fact that just under half of young people in Northern Ireland entered higher education, the status quo was no longer an option.
During subsequent questions, a number of MLAs including Phil Flanagan of Sinn Féin, Jim Allister of the Tradition Unionist Voice (TUV) and Basil McCrea of NI21, expressed concern about a possible rise in tuition fees.
In response, Mr Farry said that he had an "open mind" and that "this is not a conversation about whether we have fees or don't have fees".
"All options have to be on the table and fees are only one of many options facing us. This is not a done deal process."
The consultation ends on 23 October, and Mr Farry said he wanted to present options to the Northern Ireland Executive in the autumn.
The way that higher education is funded in Northern Ireland is "no longer sustainable", Employment and Learning Minister Stephen Farry has said.