Free university degrees for student nurses could exacerbate nationwide staff shortages in general practice, aged care and private hospitals as well as pit states against each other, peak bodies warn.

The Victorian Government has pledged to pay off the student debts of more than 10,000 nursing and midwifery graduates.

For those who signed up, it would mean domestic students enrolling in undergraduate nursing courses in 2023 and 2024 will receive up to $16,500 under the $270 million package unveiled by the government on Sunday.

While students will receive $9000 over their three years of study, the remaining debts would only be paid off if they work in Victorian public health services for two years.