A parliamentary inquiry has called for an urgent blitz of private colleges and a review of loans for students amid evidence of "rampant abuse" of the system.
An 11-month Senate inquiry into vocational education providers asks the government to provide police with evidence about dodgy providers so prosecutions can be launched.
The upper house committee also wants an ombudsman for domestic students in the sector, which would be industry-funded.
The committee heard "harrowing and concerning" evidence of "exploitative conduct, shoddy training and massive profits" by private colleges at the public's expense.
There are reports about aggressive marketing techniques - like offering free iPads - used by private educators, who have been accused of targeting vulnerable people likely to drop out of study.
Despite the students not finishing, the provider still collects government-funded loan payments.
The committee said the government had been slow to act and has "lacked appropriate agility" to crack down on the dodgy providers.
The government introduced tougher regulations in July, and more rules come into effect in January.
On Thursday, new legislation that would require students to meet a base standard of literacy, numeracy and language skills was introduced to parliament.
In addition, students would find it easier to cancel loans when inappropriate behaviour has been used to recruit them.
Those under 18 would need the signature of a parent or guardian before they can apply for taxpayer-funded loans.
Dodgy providers would also be slapped with infringement notices and be required to pay back the cost of student debt directly to the commonwealth.
The Senate committee's report, also released on Thursday, made 16 recommendations that would tighten loan restrictions, cap the lending and hand more powers to the overseeing body to crackdown on dodgy providers.
The government maintains its tougher rules on providers address all the issues raised in the inquiry, including banning the offer of free inducements like iPads and laptops.
The coalition blames the opposition for poorly designing the program when it was introduced in 2008.
Opposition higher education spokesman Kim Carr hit back, saying it was grossly negligent for the government to blame Labor for problems it had two years to fix.
"For two years this government has sat on its hands, and merely tinkered around the edges while allowing the shonks and shysters to exploit the disadvantaged and the vulnerable in the name of obscene profits," he told AAP in a statement.
