AEU Victorian branch president Mary Bluett said the introduction of a HECS-style loan scheme for tuition fees would put enormous financial pressure back on to the students.

"This policy is a terrible blow to the average Victorian seeking to pursue TAFE training and effectively shifts the responsibility for TAFE funding from the government to the individual," Ms Bluett said.

The overhaul includes 170,000 new TAFE positions across Victoria and the employment of an extra 900 teachers and 500 support staff.

The announcement was welcomed by the University of Ballarat, with deputy Vice Chancellor Terry Lloyd describing it as a "bold reform package".

However, Ms Bluett said State Government funding would actually decrease in every area except lower level courses.

"Over the next two years, fees will increase by up to 42.5 per cent in certificate III and IV courses from $877 to $1250 and by almost 300 per cent in diploma and advanced diploma from $877 to $2500," she said.

Ms Bluett said concession rates would also be abolished, affecting about 40 per cent of students.

"Instead of directing funding to areas with the worst skills shortages, the government's reforms in fact encourage competition between TAFE institutes and private providers.

"This is a deeply flawed policy."

However, Premier John Brumby said the system was fairer and would make training more accessible.

"The beauty of this, and the adjustment of the fees, is that everybody who is eligible gets a place. There's none of this where some people pay $877 and other people pay $8000 a year for full private cost recovery," Mr Brumby said.