Labor's student visa crackdown has created a problem it didn't intend

Labor has acknowledged fears that its tougher student visa rules are putting off genuine applicants and hurting Australia's universities.

The federal government says it will make the system easier to navigate without weakening its crackdown on student migration.

Universities will be consulted on revised financial requirements and changes to how student visa applications are assessed.

Labor will recalibrate its international student crackdown with an overhaul of visa requirements to ensure the tough rules do not deter quality applicants from Australia.

The federal government will review financial requirements for international students from South Asia amid concerns that high refusal rates are dissuading genuine applicants and damaging Australia's education sector.

Visa rejections have soared in the two years since a ministerial direction was introduced to strengthen assessments of whether education was the primary purpose behind a student's application.

Assistant Minister for International Education Julian Hill will use a speech in Sydney today to defend Labor's reforms to the sector as necessary to restore integrity but warn against an "overcorrection".

New international student commencements at public universities are projected to fall about 18 per cent this year, wiping about $2 billion from revenues over three years.

Mr Hill will say tighter visa rules are only partly responsible for those losses, with competition from other countries and cost-of-living pressures among the other factors.

But he will acknowledge Labor's crackdown is having unintended consequences, with high refusal rates discouraging the very students Australia wants to attract.

"They are terrified of a visa refusal that hurts their chances of studying elsewhere," Mr Hill will say.

Home affairs and education officials are developing new financial standards for South Asia and a replacement for Ministerial Direction 106, with universities and education agents to be consulted in November.

The direction was introduced in 2024 to help immigration officials assess whether student visa applicants genuinely intended to study in Australia, including scrutiny of their financial circumstances.

Student visa rejections subsequently soared, with more than 24.2 per cent of applicants knocked back last financial year.

More than 51 per cent of all student visa applications from Nepal were rejected over that period, while in India more than 40 per cent were refused.

The changes now under consideration are designed to provide greater certainty for prospective students about their chances of securing a visa.

Mr Hill will flag the possibility of raising financial thresholds, arguing clearer requirements could improve visa approval rates even if fewer prospective students qualify.

"Even if this means raising the financial standards and a smaller pool of prospective students, I want grant rates to improve and greater certainty for everyone," he will say.

The government is also considering a New Zealand-style system allowing students to deposit funds covering their tuition and living expenses to demonstrate their financial capacity, although Mr Hill will caution this would be a longer-term reform.

He will insist Labor has no intention of abandoning its efforts to rein in student migration, arguing the changes are necessary to protect the integrity of the system.

Mr Hill will say the government's intention is not to "tank" the international education sector as other nations, such as Canada, have done.

International education is Australia's fifth largest export sector and supports about 250,000 jobs.

But Mr Hill will take aim at private education providers he says "harvest" profits, while public institutions reinvest surpluses into teaching, research and facilities.

"In a sector where overall customer numbers onshore have to be limited, then the highest value for Australia — as a nation and for taxpayers — comes from students at public institutions, studying with diverse cohorts of young Australians and international peers," he will say.