The federal government has banned training providers from imposing withdrawal fees on vocational students who leave courses early.

The rules, announced on Thursday, ban providers from charging withdrawal fees after July 1 to students who drop out of courses before the education census date.

The Assistant Minister for Education and Training Simon Birmingham said private providers had been charging exorbitant withdrawal fees, with some students forced to pay as much as $1000 to exit before the census date.

"We have listened to students who have felt under pressure to make these study and payment decisions or who lacked clarity on what decisions they were making. Students will now have full information and time to consider their options carefully," he said.

"We will continue to provide products and services that inform students on what they need to look for when taking on a VET FEE-HELP loan, and I will continue to work with consumer law agencies to put a stop to unscrupulous enrolment practices and to protect students."

The new rules are part of a wider crackdown on the distribution of misleading advertisements and the soliciting of students for courses they are not suited to by training providers. A joint investigation by the NSW Department of Fair Trading and The Australian Competition and Consumer Authority in March into unscrupulous training providers, revealed that at least 600 people had been duped into taking out unfair student loans.

The latest changes to the private education and training sector follow a crackdown earlier this year on unscrupulous sale techniques employed by providers to recruit prospective students.

The ban will also stop training providers from advertising courses that attract VET FEE-HELP loans as "free" or "government-funded".

Shadow Minister for Vocational Education Sharon Bird has welcomed the ban on charging withdrawal fees.

"It is a significant issue and one that Labor supports reform on. Appalling, shonky and unscrupulous practices by some private training providers damages the reputations of the majority that engage in good and ethical practice.

"I am aware of stories in which training providers have set-up outside of Centrelink in a bid to persuade people to sign up for courses which are ill-suited to them or where they have gone around door-knocking."

The National President of the National Tertiary Education Union Jeannie Rea hit back at the government's announcement on Thursday, saying that unethical practices employed by some private providers proved that deregulation is too risky.

"As these new regulations clearly demonstrate, deregulation as has occurred in VET, brings dodgy providers out of the woodwork to the detriment of students and taxpayers," she said.

However Open Universities Australia CEO Paul Wappett said the move will deliver protection to VET students similar to those enjoyed by students in higher education.

"Any registered training organisation should be primarily interested in the welfare and success of its students and these new measures provide greater protection for students from unscrupulous providers," he said.

"Change of mind protection without penalty is offered to consumers in most other industries and education in particular should be on par."