Some students with poor high school results may end up wealthier going to TAFE, not uni

Going to uni may not be the most lucrative option for everyone.

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A new report by the Grattan Institute shows that some low-ATAR university graduates earn more after graduating TAFE compared to their uni graduate counterparts.

Despite this new finding, the number of students enrolling in universities has more than tripled in the last three decades, while participation in vocational training has remained steady.

Vocational diplomas in construction, engineering and commerce are courses which are most likely to result in a higher lifetime income for students with low ATAR results.

Grattan's higher education program director Andrew Norton said the popularity of university has led to students overlooking vocational education that could lead to better job prospects.

"A good tertiary education system steers prospective students towards courses that increase their opportunities and minimise their risks," he said.

"Australia's post-school system does not always achieve this goal."

About a quarter of students who start a bachelor degree leave university without a qualification. New graduates are less likely to quickly find a full-time job than they were a decade ago.

Mr Norton said high schools need to give better career advice to inform students of all the options available.

"And governments should end funding biases against vocational education," he said.

Better financial outcomes for vocational graduates are skewed toward male-dominated courses such as construction and engineering, where few women enroll.

"Engineering occupations are male-dominated, often deny women employment, and are inflexible in providing part-time work," Mr Norton said.

The outcomes for courses popular with women, such as teaching and nursing, are similar for vocational and university courses.

"For lower-ATAR men, a few vocational education courses would probably increase their employability and income. But for lower-ATAR women, higher education is almost always their best option," Mr Norton said.

The report follows a new federal government scheme that will tie university funding to the number of graduates who get jobs, ending a two-year freeze on funding.

The performance-based funding scheme will take into account graduate employment outcomes, student success, student experience and participation rates of Indigenous and low-socioeconomic status students.

Education Minister Dan Tehan said the model would provide an incentive for universities to produce job-ready graduates.

"This report shows that while we have a world-class higher education system, it needs to be stronger, more sustainable and fit for purpose," Mr Tehan said.