Labor declared the coalition would "rue the day" its reforms were passed, vowing to fight against the schools funding package all the way to the next election.
"I will not forget and we will not forget that this legislation is not fair, it is not needs-based, it is not sector-blind," opposition education spokeswoman Tanya Plibersek said.
"There is nothing worse that this parliament can do than rob the children of Australia of hope and opportunity, and that's what you have done," she told coalition MPs.
Labor vowed to restore every dollar cut by the coalition.
The Gonski 2.0 package will ensure underfunded schools reach funding targets in six years instead of 10 and $50 million will be spent on a transition fund for Catholic and independent schools over 12 months.
The government also agreed to a new watchdog conducting a review of the schooling resource standard, which is the basis of the new needs-based funding model, and a guarantee the states won't withdraw their funding as more federal money flows through.
The reviews can address whether the commonwealth, states, territories or authorities are not distributing funding on a needs basis, or whether schools are being over or underfunded.
Greens senator Sarah Hanson-Young said struggling students had waited far too long.
"It is a relief we finally have some commitment to bring forward the obligations to ensure that our schools right across the country that are underfunded can start to catch up," she said.
Outgoing Liberal senator Chris Back, who had threatened to vote against the package, climbed aboard after the minister agreed to extend existing arrangements for Catholic and independent schools for a year.
The Greens refused to vote for the bill because of this transition package, but the government successfully negotiated instead with the crossbench.
Education Minister Simon Birmingham said the Gonski 2.0 scheme would ensure equal federal funding for students no matter where they lived, providing incentives for states and territories to meet their end of the funding bargain.
Schools will see changes to the money they receive from 2018.
Here's how Gonski 2.0 works for schools:
* Still calculates schools funding with a base per-student amount (known as SRS) plus loadings to compensate for poorer, disabled, non-English speaking and indigenous students and schools that are small or remote.
* The per student base amount in 2018 will be $10,576 for primary students and $13,290 for secondary school students.
* Those amounts will be indexed at 3.56 per cent a year through to 2020, and move to a floating indexation based on inflation and wage increases from 2021 (with a minimum increase each year of 3 per cent).
* Government funding to private schools takes into account a measure of parental capacity to pay. How that's calculated will be reviewed and may change in 2019. In the meantime, $46 million in transition funds will be available to Catholic and independent schools in 2018.
* The commonwealth share of funding will move to 20 per cent of SRS for public schools and 80 per cent for private schools - more than its average share now and in line with historical arrangements.
* Schools below the SRS will move up over six years and schools above SRS will move down over 10 years.
* Total commonwealth school funding will increase by $23.5 billion over the next decade
* State and territory governments are expected to make up the rest (ie 80 per cent for public schools and 20 per cent for private). Late changes to the legislation lock in regular increases to make sure states reach these required amounts over the next six years or at the very least don't cut funding..
* An independent National School Resourcing Board will be established to keep an eye on how the states and other school authorities distribute funds to schools and review funding levels and other matters, including how parental capacity to pay is calculated. This board will cost $7.2 million over four years.
* Businessman David Gonski, who led the 2011 review of school funding, has agreed to head a new review of the most effective ways to spend money to improve student achievement.
Glen Park will see very little money and state governments will be under continued financial pressure over education funding.
In fact Tanya Plibesek just tweeted this: We will restore every dollar the Liberals have cut – Labor will never give up on Australia’s school children
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