Most of Portugal's 250,000 university students boycotted classes in a

A COMMA + VERBing modifier serves to express CONTEMPORANEOUS action: an action attributed to the preceding subject and happening AT THE SAME TIME as -- and often as a result of -- the preceding action.
Thus, A implies the following:
When the students contribute $330 a year, they are AT THE SAME TIME previously paying $7 per year.
Not the intended meaning.

B states that students must contribute $330 a year toward their education, for which was previously paid $7 per year.
Here, it's unclear WHO previously paid $7 per year.
Also, a reader might construe that BOTH amounts are being applied to a student's education (the $330 a year AND the $7 previously paid).
To make it clear that one amount ($330 a year) is serving to REPLACE the previous amount ($7 per year), a word of contrast is needed (such as instead or whereas).
Eliminate B.

In C, previously (adverb) cannot serve to modify the $7 per year (noun phrase).
Eliminate C.

In E, the reason that students must contribute $330 a year seems to be conveyed by the modifier required previously for the cost of higher education.
The result is a nonsensical meaning:
A law that REQUIRES them to contribute $330 a year REQUIRED PREVIOUSLY.
Eliminate E.

The correct answer is D.

Instead of is a preposition that means IN PLACE OF.
Generally, instead of + noun serves as an adverb, indicating that an action is performed upon one thing INSTEAD OF another.

In the SCs below, all of the modifiers within quotes serve the same basic function:
Each serves to FURTHER DEFINE A VALUE IN THE PRECEDING CLAUSE (shown below in upper case letters).

The law requires students to contribute $330 A YEAR toward the cost of higher education, "instead of the $7 per year" required previously.

Soaring television costs accounted for MORE THAN HALF the spending in the presidential campaign of 1992, "a greater proportion" than in any previous election.

Companies in the United States are providing job training and general education for nearly EIGHT MILLION PEOPLE, "about as many" as are enrolled in the nation’s four-year colleges and universities.

Siberia's Lake Baikal holds 20 PERCENT of the world's fresh water, "more than all" the North American Great Lakes combined.

These sorts of modifiers are VERY COMMON on the GMAT.
COMMA + instead of + noun is simply one example of this type of modifier.

option D: X instead of Y. X = $330 a year toward the cost of higher education, Y = the $7 per year required previously

option E: X as opposed to Y. X = $330 a year, Y = the $7 per year required previously for the cost of higher education

In D, it is clear why $330 is required. It is also clear why $7 was required, because the sentence states the $7 required previously.
In E, it is not clear why $330 is required. It is nonetheless clear why $7 was required previously.

Because of the lack of clarity about $330 a year in E, D is a better option.