Common sense reform for rural students a long time in coming.

The Federal Parliament has signed off on changes to Youth Allowance that will make it easier for rural and remote students to go to university.

The Family Actual Means Test and Family Asset Test will be removed from the Youth Allowance Personal Test from the beginning of next year.

An income test will still apply, but all dependent children will be taken into consideration in that assessment, which the Government says will "soften reductions in Youth Allowance" as family income increases.

The Isolated Children's Parents Association (ICPA) has been pushing for the change for almost 20 years, arguing that children from asset-rich but cash-poor families were being unfairly prevented from pursuing tertiary education.

Its emotional immediate past president Judy Sinclair-Newton said news that the bill had passed "means a lot" to regional Australian families.

The changes will mean thousands more people qualify for an average annual youth payment of more than $7,000 per year.

The government said more than 1,200 families from regional and remote areas will benefit from the changes.

"We have these assets that don't generate a lot of income," Ms Sinclair-Newton said.

"Families often have two or three children away at boarding school, and then to commit to higher education costs of living away from home, it's huge to families.

"I just can't believe that it's gone through."