The development agency said offering students a financial reward for doing work in the community does not meet the definition of volunteering.
In last week's Budget, the Treasury said youth volunteering charity v is to consult young people on the idea.
Christopher Spence, the chief executive of Volunteering England, said: "Offering incentives is dangerous and other voluntary organisations may feel pressurised to follow."
Mel Foster, marketing and communications director at v, said: "We know there are differing views. That is why the consultation with young people is so important."
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