Government funding for all private colleges will be frozen as part of new measures cracking down on unscrupulous training providers.
The federal government on Tuesday announced it would move to a new model for the provision of the VET-FEE HELP scheme from 2017, following concerns about dodgy practices in the industry.
Other measures include more stringent requirements for new providers, quarterly instead of advance payments and funding pauses for colleges of concern to the education department.
The measures will be included in existing legislation being debated in the Senate on Tuesday.
It imposes tighter regulation on providers, including allowing students to cancel loans when inappropriate behaviour has been used to sign them up to courses.
Labor criticised the government for springing the changes at short notice.
"The government, in an act of blind panic, dropped these at one minute to midnight," higher education spokesman Kim Carr told reporters in Canberra.
The opposition said the measures were a step in the right direction and signalled it was willing to consider them.
But they want tighter rules, including an industry ombudsman and an opt-in arrangement so students understand they're signing up to thousand-dollar loans.
