Labor has agreed to support two law changes affecting university students that will save the federal budget $1.1 billion.

The caucus on Tuesday agreed to back the replacement of the student start-up scholarship with an income contingent loan known as the student start-up loan, saving about $920 million over four years.

Student start-up scholarships are set to be converted to loans under the measure. Credit:Joe Armao

Labor MPs also agreed to remove the 10 per cent HECS-HELP up-front payment discount, which would save $200 million over the budget forward estimates.

Labor legislated the measures in 2013 as a way to help pay for the Gonski school education reforms but never passed them into law. It has since resisted passing the savings because the government has only committed to funding the first four years of Labor's six year school funding deals.