The annual cost of the student loans program to the budget is expected to blow out by a staggering 560 per cent over the next decade, according to a shock new report that will pave the way for major changes to the system in the upcoming budget.

The independent Parliamentary Budget Office (PBO) projects the total value of the student loans program will grow from around $60 billion now to $180 billion by 2026 - a surge it attributes largely to the Coalition's policy to allow universities to set their own fees.

The report will be used by the Turnbull government to justify significant higher education savings, including expected changes to the loans program, in the May 3 budget. The government is considering lowering repayment thresholds and increasing fees in a bid to stem the ballooning costs in the education portfolio.

The real cost of the Higher Education Loans Program - which covers both university and vocational loans - to taxpayers has long been unclear because it is not included in the budget papers.