Australian students will be limited to the equivalent of five years'

full-time study if they are admitted to a government-subsidised place after January 2005.

Under the learning entitlement system, students paying reduced fees through the Higher Education Contribution Scheme will be given a personal ID and tracked through their courses by a yet-to-be developed computer system.

After five years they will either leave university or pay the full cost of their tuition. The government is also introducing an interest-bearing loans system to allow students to borrow up to A$50,000 (£20,000) to pay full fees.

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Education minister Brendan Nelson said the five-year entitlement could be extended for longer courses such as medicine. To encourage lifelong learning, students would receive an additional entitlement after a number of years.

"The learning entitlement will provide greater opportunities for more students to gain access to a commonwealth-supported higher education place," he said. "New entrants would then be able to occupy places freed by students who have consumed their entitlement."

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But the plan was criticised by students and academics who claimed students could use all of their five years as an undergraduate and not be eligible for a Hecs place as a postgraduate.

Benjamin McKay, president of the Council of Australian Postgraduate Associations, said that during Dr Nelson's year-long review of higher education, "at no time did we suggest that saddling students with a repackaged debt scheme, attached to the bizarre concept of learning entitlements, was a sound investment for the funding of university places".

All students will receive the full five-year entitlement from January 2005, regardless of how much study they completed previously.