University students will have to pay back student loans when their earnings hit $45,000 under draft laws which have cleared the Senate.
How much students can borrow from taxpayers will be capped at $104,440, or $150,000 for medicine, dentistry and vet science students after legislation which passed the upper house on Monday.
The government wanted to cap loans for life, but dumped the measure in favour of making the debt limit renewable.
Under the government's push to cut tertiary education spending, students will be able to borrow multiple times provided they have paid off enough debt to remain below the limit.
Labor and the Greens were opposed to lowering the threshold to repay loans from $55,000 to $45,000 a year.
Earlier, Nationals senator Steve Martin crossed the floor to oppose the bill.
The former independent senator said he maintained his opposition to the changes held before he joined the Nationals in May.
"Some would say I'd be crossing the floor against my party, however, I see it as staying true to my word," Senator Martin told parliament.
The Tasmanian senator joining forces with Labor and the Greens wasn't enough to stop its passage, with the government winning the final vote 34-33.
Senator Martin said the lower threshold would stop prospective students from undertaking tertiary education.
"Students are one of Australia's most precious resources and we should invest in them," he said.
Education Minister Simon Birmingham said the changes were needed to ensure the system's long-term viability, with outstanding loans under the HECS-HELP program totalling more than $50 billion.
"Estimates are that without the types of changes we're proposing around one quarter of that $50 billion in outstanding loans will not be paid," Senator Birmingham said.
The minister accused Labor of avoiding making tough decisions to improve the sustainability of the loans scheme.
The bill will now return to the lower house to tick off amendments relating to the new regime's start date, July 1 next year.
