Graduates and students will have to start forking out for student loan repayments when their earnings hit $45,000 when changes begin next July.
As part of the Turnbull government's push to cut tertiary education spending, the loan repayment threshold will be reduce from $55,000.
The borrowing limit will also be capped at $104,440, or $150,000 for medicine, dentistry and vet sciences students, under the new legislation.
It passed the Senate on Monday night and amendments to introduce the new start date of July 1, 2019, were passed by the lower house on Tuesday.
Labor education spokeswoman Tanya Plibersek says the changes will hit people in lower paid jobs hard, while women will be hit disproportionately.
"Investment in education doesn't just benefit the individuals who receive the education, it benefits our nation," she said.
Amendments to remove loan fees were also approved.
