GMB union said the university planned to stop the Â£142,000 a year it pays to run the day nursery and play scheme.
The union said the move would have a negative impact on women in the workplace and student parents.
The university said the nursery was heavily subsidised and it was consulting with staff and users on an alternative way of operating it.
GMB said the current makeup of nursery users was 43% staff, 31% students and 26% community users.
A spokeswoman said closing the nursery would impact on staff, largely women, who were already facing job cuts as part of savings announced by the university on Thursday.
"A potential closure of the provision will have a double negative impact on women in the workplace and students who have chosen to study at USW because of the on-site provision.
"Some students will potentially have to reconsider their learning if the play centre provision was to be removed.
"In addition, students studying at USW utilise play centre work placements to compliment their studies for courses at USW i.e. nursing and psychology."
The University of South Wales said it was a parent-friendly institution and it hoped funding support would always be available for student parents with financial hardship.
A spokesman added: "The current play centre provision on one of our campuses is heavily subsidised by the university and used by a relatively small number of staff, with a smaller proportion of students and community users.
"We are open to proposals for different operating models and are consulting on how it could be configured another way without that extra subsidy which comes ultimately from all students, including those on other campuses."
Funding for the children's nursery at University of South Wales' Treforest campus could be withdrawn.