Treasury has cast doubt on a $6 billion budget saving proposed by Labor.
Labor leader Bill Shorten revealed in his budget reply speech a move to save $6 billion by introducing a loan cap of $8000 a year in the VET FEE-HELP program - which provides loans for vocational education students.
Under Liberal questioning at a Senate estimates hearing on Friday, senior Treasury official Michael Brennan said any limit placed on the size of such a loan "would have a positive impact on the fiscal balance".
"But over time, probably a slightly negative impact on the underlying cash balance," Mr Brennan said.
However, he said he could not comment on the specific policy without further analysis.
Mr Shorten said in his speech the pendulum had swung too far to private providers, some of which had been "ripping Australians off".
In 2014 the 10 largest private training colleges received $900 million in government funding but fewer than five per cent of students graduated, he said.
Treasurer Scott Morrison said it was important to ensure the public-private model of vocational education was not undermined.
"There are many, many jobs that are tied up in the private education industry ... and if Bill Shorten is going to pull the rug out from under the private education industry, this is one of our growth sectors," Mr Morrison told reporters in Brisbane on Friday.
