In her first major speech on the controversial ID card scheme, home secretary Jacqui Smith said that students would be "encouraged" to get cards as part of plans to let "consumer demand" drive take-up.
She also promised to shave £1bn off the cost of the project.
Non-EU migrants applying to enter or remain in the UK will be the first to get the cards this November. Cards will contain details of their immigration status and indicate whether they are allowed to work.
The scheme will extend to British people working in high-risk areas such as airports and power stations next year. Staff and volunteers at the 2012 London Olympics are also expected to be issued with the cards.
From 2010, students and young people will be given the opportunity to get the cards as they open their first bank accounts, take out student loans, or start employment.
From 2011 all British subjects who renew their passports will be routinely added to the National Identity Register.
They will be given a choice in whether to have a biometric passport, a national ID card, or both, as the passports will be accepted as a form of ID and the card will be valid in place of a passport inside the EU.
The government hopes to achieve full rollout by 2017.