The lowering of the HECS repayment threshold – down from the current $55,874 – will lead to almost 200,000 extra graduates dragged into the repayment system. The threshold was previously legislated to fall to $52,000 in coming years. 

Universities will also be hit with funding cuts through a 2.5 per cent efficiency dividend in the package, designed to save the budget $2.8 billion in total over the next four years.

The package is a more measured approach than as set out by the Abbott government’s 2014 budget, which proposed the full deregulation of university fees and a 20 per cent funding cut, but still carries political risk for the Coalition and will be difficult to get through the Senate. 

The changes, unveiled by Education Minister Simon Birmingham on Monday night, is also the first time university funding is linked to success in completion rates, student satisfaction and employment outcomes.

If the package is legislated, a series of staggered fee increases will start from next year that will see the cost of a degree increase by 7.5 per cent by 2021.

Fees would increase by a maximum of $3600 for a four-year course, with students paying 46 per cent of the cost of their degree on average - up from 42 per cent currently.

The cost of four-year teaching and nursing degrees would rise by $1250 to $27,800 while the cost of a six-year law degree would rise by $3900 to $71,900.

Describing the package as “fundamentally fair”, Senator Birmingham said the changes would more evenly distribute the costs of education between students, taxpayers and universities.

He said that Labor’s warnings of "$100,000 degrees" under the government's policies were scaremongering and that lowering the HECS repayment threshold, which applies to all student loans, including for vocational courses, will mean low-income earners begin repaying their debts far earlier in their careers.

Repayment rates will be changed so students only start paying back 1 per cent of their income when they earn $42,000 with repayment rates rising in line with income. 

Graduates will start paying back 7 per cent of their income when they hit a salary of $84,513 rather than $91,426 currently.

Also defending the changes is Member for Cowper, Luke Hartsuyker. He said the Turnbull Government’s higher education reforms will drive better outcomes for both students and taxpayers.

“The reforms delivered on the Turnbull Government’s commitment to higher education reforms, were financially sustainable, and ensured students had the choice and opportunities to succeed,” Mr Hartsuyker said.

“Regional students and students from Cowper will be big winners from our reforms.

“The Australian Government has been a strong supporter of tertiary education in our region, with more than $60 million in capital investment allocated to university facilities in Cowper.

“In addition to this significant capital investment, we’re delivering a range of initiatives that will help students in our area.

“We’re removing the barriers that many regional and remote students face in high quality education and support through the Higher Education Participation and Partnerships Program, we’re expanding Government support to sub-bachelor courses to give students a better opportunity to obtain a relevant, recognised qualification more quickly, and we’ve committed $24 million for Rural and Regional Enterprise Scholarships, which will support 1200 regional and remote students to undertake science, technology, engineering and mathematics studies.

“There will be no fee deregulation and we’ll ensure Australians who want to study have the opportunity to do so, that universities are properly accountable for their public funding, and costs and risks are better shared between taxpayers, students and institutions.

“These reforms will ensure our record levels of investment in higher education drive better results for students and better value for money for taxpayers.”

“This is about striking the right balance and about setting up our universities for the future.

Mr Hartsuyker said more broadly the Turnbull Government’s reforms:

In response to the reforms, Labor education spokeswoman Tanya Plibersek said raising student fees and cutting university funding showed the government was “out of touch”.

And the National Union of Students president Sophie Johnston said: “Students can't understand why this government continues to force students to pay for their budget ... what we are seeing is a reverse Robin Hood – taking from the poor to support the rich.”

Mr Birmingham rejects these claims and said the reforms mean Australia will have a more sustainable rate of growth in taxpayer support that’s accompanied by measures to ensure universities put the interests of students first.

“Taxpayer funded student loans stand at more than $52 billion and, without changes to address this situation, around a quarter of that is expected to go unpaid,” Minister Birmingham said.

“By rebalancing the share of funding between students and taxpayers and better matching the costs of courses with the money universities receive from the Government, we expect these reforms will save taxpayers $2.8 billion over the forward estimates in underlying cash balance terms.”