In a written submission to the Department of Education, the agency bemoans the fact that any company, foundation, organization or individual can freely apply the terms universitet, högskola, university and college to a new educational entity without seeking official permission.
"The problem with the system we have today is that anyone can call just about anything a university," Erik Johansson of the higher education agency told The Local.
The agency has suggested replicating the situation in Norway, where legitimate colleges and universities have their titles protected by law.
"The two fake Universities which exist in Sweden today, Alhuraa University and the Scandinavian University of Science and Technology are on the verge of breakdown because of all the bad publicity they've received in the press," said Johansson.
"But I don't think it should come down to the media, I think we need a strong law."
Both universities offer academic degrees up to doctoral level but neither are registered academic establishments in Sweden.
Unless Sweden takes a hard line it risk becoming any easy target for fake universities, the agency argues.
"We'll be like a tax haven, except in the field of education. There are signs that we could have the same development as in the United States, where states like California and Hawaii have become a target for fake universities."
Johansson is particularly scathing in his criticism of Alhuraa, a "university" based in the Stockholm region claiming to be a branch of an organization of the same name in the Netherlands.
"Alhuraa University is targeting the Iraqi diaspora which means that they're making money off people who have been through a lot already, which in my opinion is very cynical."
The second fake school, the Scandinavian University of Science and Technology (SUST), "targets an English-speaking group". It is only accessible via the internet, and has a post office box registered to an address in Angered, a suburb of Gothenburg.
But were Sweden to follow Norway's example and tighten its laws in this area, fake universities would not be the only organizations to feel the heat.
"If we were to completely copy their legislation it would mean Swedish colleges [högskolor] would no longer be allowed to call themselves universities in their English marketing," said Johansson.