Around a fifth of private colleges in Australia are 'residency factories' cashing in on foreigners desire to live in the country rather than providing an education, according to a new report into the $17 billion sector.

The report by former Liberal MP Bruce Baird calls for tougher registration for the industry which it says has been significantly 'distorted' by unscrupulous providers cashing in on foreigners desire to live in Australia.

The sector, Australia's third largest export industry, has been  beset by attacks on international students, especially Indians, and hit by claims that some education providers were exploiting foreigners.

'We have permanent residency factories. If you ask any of the good providers they'll quickly name those who they believe are the dodgy operator's in the system,' said Baird.

'It is those groups that we should be directing our attention to. I certainly think that they represent about 20% of the vocational sector,' he added.

Baird wants only tertiary providers with a sound business model and the capacity to uphold Australia's reputation for quality education to be registered. His report calls for the development of clear, enforceable standards, and fines for non-compliance.

'High risk applicants should not be allowed in. If they are medium to lower risk, they would have to pay a higher rate of registration and they would be monitored more regularly,' he explained.

Baird proposes that international student hubs be set up in each state and territory to provide information and advocacy services and suggests the federal government expand its Study in Australia website to include a manual available in major languages.

'We need to do more work in terms of social inclusion and part of the idea of the education hubs is actually to encourage greater interaction with students and the Australian community,' he said.

Education minister Julia Gillard said the government's recent changes to the skilled migration programme, which reduced the list of occupations in demand, would help weed out dodgy education providers.

'We're saying to international students, come, study in this country, it'' a great place to study. But the purpose of coming here as a student is to engage in study and end up with a qualification, not with an immigration pathway,' she added.