Labor says an extra 20,000 young Australians will graduate from university each year under its plan to guarantee the future of higher education.
Its $2.5 billion policy, unveiled on Monday, would dump the coalition's proposed changes to universities and guarantee a minimum amount of funding per student.
"We cannot afford a deficit of ambition for higher education," Opposition Leader Bill Shorten told an audience at his alma mater Monash University, where he released details of the policy.
"Right now, too many students are leaving university with a student debt and no degree."
At the moment nearly one in five university students drop out early.
Labor says slowing this will lead to an extra 20,000 graduates each year by 2020.
But Opposition higher education spokesman Kim Carr insists the switch in funding focus from enrolments to completions won't create "tick and flick" incentives for universities.
"We're not going to accept this idea of declining standards in terms of automatic passing of students," he told AAP on Monday.
To guard against this, Labor would give more money to the tertiary education regulator, set up a new Higher Education Productivity and Performance Commission, and help disadvantaged students through a 10-year $2 billion equity fund.
It would also build financial incentives for universities to lift their performance into new funding and accountability charters.
To help universities improve their teaching, Labor wants to legislate a student funding guarantee that would increase in line with inflation each year.
It says this would give universities an average of $11,800 per student in 2018.
In 2014, federal funding was an average of $11,500 per student, Education Department figures show.
This was due to drop to $9400 in 2016 under the coalition's proposal for a funding cut and fee deregulation - so far twice stymied in the Senate.
But Prime Minister Malcolm Turnbull has foreshadowed his government's plans for higher education may change.
New minister Simon Birmingham took over the portfolio on Monday and Mr Turnbull noted there were "political realities" to deal with.
"If you can't get something through the Senate, I would say it's highly possible that you could change it to something that will get through the Senate," he told ABC radio.
Labor will pay for its $2.5 billion package in part by dumping the coalition's plans to scrap loan fees for vocational students and to expand commonwealth funding to private providers and degrees below bachelor level.
The tertiary sector welcomed Labor's plans, saying the funding guarantee in particular would give policy stability.
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