SANTIAGO, Chile - Distrust and frustration loomed over Chile's education reform debate Thursday as student and government leaders began long-awaited negotiations while tens of thousands of protesters challenged police in the streets.

Both sides were angry over unmet demands after five months of protests that have shut down universities and some secondary schools, but they decided to begin talks anyway at the Education Ministry.

Outside, students kept protesting and several thousand broke away to clash with police, who used water cannons and tear gas. Organizers said as many as 100,000 young people marched in Santiago.

Officials said the two sides talked for more than two hours and agreed to meet again Wednesday to discuss student demands that the government provide free public education.

Giorgio Jackson, a representative for university students, said only that the "meeting was complex."

Strong differences remained over the government's insistence that students return to classrooms, a demand that student leaders have rejected. President Sebastian Pinera has warned that students could lose their scholarships and place in school if classes do not resume.

"We're not going to do favours for those who don't return to their campuses," said Education Minister Felipe Bulnes, who participated in the negotiations.

Leaders of various university and secondary school students groups and the president of the teachers union also took part.

Later in the day, Pinera said the 2012 budget includes $11.65 billion for education. He said that represented a 7.2 per cent increase compared with a 5 per cent rise for the total budget.