However, the government has faced criticism that this has allowed suspected terrorists and other would-be immigrants into the UK, only for them to stay on despite their visas being temporary.
Speaking on the BBC's Andrew Marr Show, the home secretary denied the system had been lax before.
"By 2011, we will have the most sophisticated system in the world to check people not just coming into the country but to check they have left as well," he said.
He said the UK remains open to those foreign students who want to come to the UK for legitimate study.
Alan Johnson: "If you are coming here for a course that is under six months you can not bring your dependents"
"We are the second most popular location for people going into higher education," he said.
"We have to be careful that we are not damaging a major part of the UK economy, between £5bn and £8bn."
Immigration Minister Phil Woolas told the BBC's Politics Show 200 bogus colleges had been closed.
"Students have foreign national identity cards. We have the e-Border counting in and counting out," he said.
"The latest proposals are a response to the moves by people who are trying to get round the system."
Under the measures, effective immediately:
• Successful applicants from outside the EU will have to speak English to a level only just below GCSE standard, rather than beginner level as at present
• Students taking courses below degree level will be allowed to work for only 10 hours a week, instead of 20 as at present
• Those on courses which last under six months will not be allowed to bring dependants into the country, while the dependants of students on courses below degree level will not be allowed to work
• Additionally, visas for courses below degree level with a work placement will also be granted only if the institutions they attend are on a new register, the Highly Trusted Sponsors List.
Liberal Democrat home affairs spokesman Chris Huhne said the UK needed to "restore immediately control of our borders".
Many of these students, if they are coming here using this route for illegal migration, will pay thousands of pounds to usually criminal gangs
Alan Johnson Home Secretary
"The biggest hole in the student visa system is caused by the Tory and Labour abolition of exit checks, which means we do not know if someone has left once their visa runs out," he said.
Conservative shadow home secretary Chris Grayling said the student visa system had been the "biggest hole in our border controls for a decade".
"Ministers should be ending the situation where a student visa is a way of coming to the UK to stay, by banning the practice of moving from course to course in order to stay on and stopping overseas students from applying for work permits without going home first," he said.
The party has also proposed that overseas students should pay a cash deposit which would be lost if they did not leave the country when their course finished.
And Conservative backbencher Mark Pritchard has gone further and proposed universities withhold degree certificates until foreign students can prove they have returned to their home countries.
But Mr Johnson said Mr Grayling's plan would just add another level of bureaucracy.
"Many of these students, if they are coming here using this route for illegal migration, will pay thousands of pounds to usually criminal gangs," he said.
"The thought of losing a bond is not going to solve this problem."
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