Treasurer Joe Hockey described the changes to higher education as "once-in-a-generation reforms", but acknowledged that the cost of obtaining a university education may increase as a result.
Young taxpayers are also facing widespread changes to Youth Allowance and Newstart payments.
Education
From January 1 in 2016, higher education providers in Australia will be able to set their own tuition fees for the course they offer.
Existing arrangements will remain in place until the end of 2020 for students already paying fees.
Commonwealth scholarships for disadvantaged students will be funded by the changes, with 20 per cent of additional revenue raised by institutions to be committed.
Changes to HELP debt will also come into effect on from July 1, 2016, when graduates earning more than $50,638 will have to start repaying student debt.
Students will fork out more when the government changes the rate at which they pay back their student loans.
Instead of remaining linked to the inflation rate, the government will lend money to students at a rate that reflects the cost of government borrowings to fund their student loans, with a maximum rate of 6 per cent.
The Treasurer also announced Trade Support Loans of up to $20,000 to fund four year apprenticeship, as well as support for diploma and sub-bachelor degree students.
"This is a watershed," he said.
Government support
The government also outlined major changes to income support for young people, with Mr Hockey saying Australians under 30 years of age "should be earning or learning".
Unemployed people under 25 will get Youth Allowance instead of Newstart, while all recipients of both payments aged under 30 will have to wait six months before receiving payments.
The changes, which come into effect on January 1, also mean young people must demonstrate that they have spent six months trying to find work before payments will be approved.
Once approved, they will have to participate in the Work for the Dole scheme at a minimum rate of 25 hours a week.
Existing recipients will also be subject to the changes, expected to save the government $1.2 billion over four years.
Finance Minister Mathias Corman said the measures ensure younger people will seize opportunities.
"The truth is, somebody shouldn’t go straight from school onto the dole," he said.
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