Student teachers, nurses and social workers will be paid during their compulsory work placements for the first time.
As part of their degrees, these students must work hundreds of hours of placement, forcing many to give up part-time jobs for unpaid labour.
But from July 2025, about 68,000 university students and 5000 vocational education and training students will be eligible for a $319.50 payment each week, in addition to income support they may already receive.
The announcement is part of the federal government's May 14 budget and comes a day after the Commonwealth revealed it would wipe about $3 billion of student debt in an effort to appeal to young voters.
Education Minister Jason Clare says the paid training placements will ease workforce shortages in the care and education sectors and could be expanded to other industries down the line.
"It's intended to make sure that a lot of people who struggle to pay the bills while they're doing (practical work) as part of their degree, finish their degree," he told ABC radio on Monday.
Nursing students have to work about 800 hours in hospitals, forcing many to give up part-time jobs. (Diego Fedele/AAP PHOTOS)
However, the allocated money was not intended to be a wage and would be means-tested, Mr Clare emphasised.
"It's designed to be a little bit of extra financial support," he said.
"There will be a lot of people who will still be able to work at the same time as they're doing this."
Prime Minister Anthony Albanese says the initiatives on student pay and debt will help expand access to education and ensure no-one is left behind.
"We're proud to be backing the hard work and aspiration of Australians looking to better themselves by studying at university," he said.
Universities Australia executive Luke Sheehy says the payments will prevent students from having to choose between study and paying the bills.
"These students can't graduate without practical experience, but too many are being held back by placement poverty which can be the difference between commencing and completing a degree," he said.
It's hoped the payments will prevent students from choosing between study and paying the bills. (Dan Peled/AAP PHOTOS)
While the Australian Services Union and the Australian Nursing and Midwifery Federation welcomed paid placements for their future workforces, the Australian Education Union (AEU) urged the government to do more.
The AEU's federal president Correna Haythorpe said changes are needed to help those who had already embarked on their careers.
Greens Senator Mehreen Faruqi said the government's plan "lacks ambition" and its reliance on means testing could hurt students.
"Students should be paid at least the minimum wage for their work on placement, not a lesser supplementary amount," she added.
The government also announced it would spend $50.2 million on scholarships for nurses and midwives, allowing them to upskill.