Taxpayers would subsidise the training of priests and other religious workers at private colleges for the first time under the Abbott government's proposed higher education reforms.

As well as deregulating university fees and cutting university funding by 20 per cent, the government's proposed higher education package extends federal funding to students at private universities, TAFES and associate degree programs.

Religious teaching, training and vocational institutes would be eligible for a share of $820 million in new Commonwealth funding over three years.

Labor and the Greens attacked the policy, saying it breaches the separation of Church and State. Earlier this year the government controversially announced it would provide $244 million for a new school chaplaincy scheme but would remove the option for schools to hire secular welfare workers.