Universities face a $2.8 billion cut and students will have to pay more for degrees under the Turnbull government's overhaul of funding arrangements.

In addition, part of future university funding will be linked to performance measures such as more transparent admissions processes and better student retention and success.

But Education Minister Simon Birmingham says the cut, which will be imposed via a two-year efficiency dividend on teaching funding only, represents less than four per cent of total university revenue.

And student fees will be at most $75,000 - for the priciest six-year medical degrees.

Earlier today, the minister released a Deloitte report showing government funding for teaching grew 15 percent between 2010 and 2015, while the cost of delivery only grew by 9.5 percent.

But universities have hit back, saying the report authors themselves said it couldn't be used to compare costs over time.

"It cannot be used to justify further major cuts to public investment," Universities Australia chief executive Belinda Robinson said.

"Base funding to universities needs to do more heavy lifting than ever because of a decline in other sources of funding for university infrastructure and equity programs over the past six years."

Under the planned changes, students studying a four-year bachelor degree will pay between $2000 and $3600 more over the duration, and all can be deferred on the income-contingent HECS-HELP loan scheme.

But Senator Birmingham told university heads, students and businesspeople today the idea that fee increases deterred poorer students from taking up university study was a myth.

All the facts showed the loan scheme completely insulated students.

"The reality is that students know their employability and likely income are enhanced by holding a university qualification," he said.

"The lifetime benefits far outweigh the costs, which continue to be entirely deferrable under one of the world's most generous student loans schemes."

Once students start earning, the repayment threshold for their loans will kick in at $42,000 from mid-2018 - a substantial drop from the current $55,000 threshold.

Senator Birmingham said this was the first major redesign of the loan scheme in a decade.

The May 9 budget will hold a range of other changes, including allowing universities to enrol as many students as they want in sub-bachelor courses and get government funding, provided those students haven't completed a higher education qualification before.

The government will also set up a new $37 million-a-year fund offering students postgraduate scholarships at any institution they choose.

Senator Birmingham said the government wanted its changes to boost quality, enhance choice, drive innovation and improve equity of access while delivering financial sustainability.

"Students are the reason we have universities. Students are the reason we fund universities," he said.

"They are the future researchers, technicians, leaders of industry, employees and employers of other Australians.

"We need to nurture their progress, expand their horizons, provide them with opportunities and ensure that they have the information, resources, support and encouragement they need to succeed."