Up to 65,000 university students - 30 per cent of graduates - will be jobless four months after finishing their studies, and those finding employment will be earning less, the federal government has forecast.

The predicted major downturn in graduate employment will occur at the same time student debts are expected to soar with the deregulation of university fees and an increased interest rate applied to student loans.

Preliminary estimates also indicate that the amount of student debt owed to the government, which will never be repaid, could jump to $3 billion a year under the new rules.

Tim Higgins, a senior lecturer in actuarial studies at the ANU, said fee deregulation raised concerns about future budget blowouts as students load up on debt. ''There are no incentives for universities to manage the risk of loan non-payment because the government pays the shortfall,'' Dr Higgins said.

The budget papers show only 70 per cent of higher education graduates are expected to have a full-time job within four months of finishing a degree in 2016-17 - down from the 78 per cent predicted a year ago. This means 64,800 new graduates will be out of work, 17,000 more than predicted in last year's budget.

Graduate salaries are also expected to fall.

Starting salaries for higher education graduates, as a proportion of average male weekly earnings, are forecast to fall from 78 per cent this year to 74 per cent in 2016-17.

A spokesman for the Education Department said the figures reflect Treasury forecasts of a softer labour market in coming years, with unemployment forecast to rise to 6.25 per cent in the June quarter next year.

Graduates in full-time employment fell from 76 per cent in 2012 to 71 per cent last year, according to a Graduate Destination Survey.

Education Minister Christopher Pyne has justified fee deregulation by pointing out there are significant personal benefits to having a degree, with graduates earning about 75 per cent more than non-graduates - or about $1 million more over their lifetimes.

Greens higher education spokeswoman Lee Rhiannon said: ''It beggars belief the government would introduce these changes when their own department's figures show fewer graduates will be employed.''

On budget night the government announced that it would cut its contribution towards the cost of university courses by an average 20 per cent, saving $1.1 billion over three years. It will also reduce the annual indexation of its contribution, switching to the consumer price index.

To compensate the higher education sector, the government is allowing the universities to structure the fees they charge for different courses.

Students borrow money from the taxpayer to pay for their course. These loan payments are expected to increase from $6.6 billion this year to $12 billion in 2018, a Department of Education spokesman said, with another 80,000 participants accessing the system for the first time and the impact of fee deregulation.

Grattan Institute Higher Education program director Andrew Norton, and other academics, said the amount of unpaid debt arising from these student loans had the potential to grow dramatically.

smh.com.au