The Higher and Further Education Minister would not adopt a system of student support which would benefit the better off, the conference heard.
During a debate on his review of student finance, Mr Sean Farren told party delegates his first priority was to "assist those in most need, not take from those with the least capacity to pay and give to those with the greater capacity".
The Minister acknowledged that the system of loans and payment of tuition fees was "clearly flawed" but said he would have to work within the constraints of the Northern Ireland Executive budget.
Delegates backed a position paper which aspired to free third-level education but recognised the limitations on executive funds by demanding graduates should pay towards their fees once they started work.
The repayment of debts was opposed by Mr Paul Callahan, an SDLP Youth delegate, who argued that if the party upheld the principle of free education it would be showing the "advantage of devolution".
Mr Sean Doherty said that as a social democratic party the SDLP should adhere to its principle of free education. "What might be good enough for New Labour is not good enough for the SDLP," he said.
Mr Justin McCamphril called for funds for third-level education to be targeted at those who could not otherwise afford it. Those who could already afford third-level education would be the main beneficiaries of free tuition, he argued.
The conference also heard calls for the abolition of the 11-plus exam which decides whether children in the North attend grammar or secondary school.
Mr Paul Grey, from Lagan Valley, said the system was "madness" as talent and potential came in many forms and could not be measured at 11 years.
Ms Rosemary Flanagan, from Enniskillen, said the selection procedure labelled the vast majority of children as failures at a young age. This led to feelings of low self-esteem which continued into later life, she said.
Ms Yvonne Byrne detailed the long hours candidates spent doing intelligence tests in preparation for the 11-plus. Alluding to the old adage that youth was wasted on the young, she said: "The 11-plus wastes the youth of the young".
Mr P.A. McLoughlin said that while he did not want to justify the 11-plus, for a long time after its inception "Catholics had no chance without it". He said he applauded the abolition of the exam but urged the conference not to rush headlong into it without having considered the alternatives.