UNIVERSITY students in Toowoomba could move away from arts-based degrees as a result of the Federal Government's proposed increases to fees.

Education Minister Simon Birmingham announced the proposed changes just a week before the Federal Budget, which included a 7.5% funding cut by 2021 to the University of Southern Queensland and the lowering of the HECS debt threshold to just $42,000.

It means students would pay up to $3600 more for their courses and start paying it back sooner.

USQ student ambassador Aidan Train, who is studying civil engineering, said fee increases could make certain degrees less attractive.

"The changes will make people tend towards the degrees that will have a constant high-paying rate," he said.

"It'll change people's choices to pick a degree that will have a nice salary that's more definitive at the end, so people will be less likely to go into creative arts degrees.

"In the short-term it won't affect me or people I know, but I see it affecting cost of living down the track when you are in employment.

"I understand why they did it, but I don't think it's particularly fair."

Universities will also be under higher scrutiny, with penalties proposed for organisations that failed standards of transparency and performance.

USQ deputy vice-chancellor of students and communities Carl Rallings said the proposal was not as bad as the previous attempts to deregulate the sector by the Abbott Government.

"No one likes having to pay more fees - it's going to be more unpopular, but what's good is the government has recognised that there will be pain for students and they've preserved that equity funding," he said.

"There are cuts, but they are of a smaller magnitude than the earlier ones proposed."

USQ received $243.5 million in government funding during the last financial year, to pay for research, scholarships and staff salaries.