The European Commission wants to handout up to 30,000 of the passes, which allow continent-wide train travel for up to a month.
It claims the scheme will “help foster a European identity, reinforce common European values and promote the discovery of European sites and cultures”.
The first participants are set to benefit from the scheme this summer after it was unveiled today.
Commissioner for Education, Culture, Youth and Sport, Tibor Navracsics, said: “It is important that we offer all our young people the opportunity to broaden their horizons by experiencing other countries.
“Education is not only about what we learn in the classroom, but what we discover about the cultures and traditions of our fellow Europeans.”
But the cost of the programme could raise eyebrows at a time when EU leaders are deadlocked over how to plug the budget blackhole left by Brexit.
Jean-Claude Juncker is struggling to find a solution and has ordered EU nations to prop-up the ailing bloc by raising their contributions to 1 per cent of GDP.
European budget commissioner Guenther Oettinger revealed last month the EU faces an £11billion shortfall due to Brexit, which forms part of an overall £18billion budget blackhole caused by other crises, including migration.
Many countries are reluctant to pay more, arguing they already pour enough to the Brussels coffers.
The Netherlands has come out against coughing up higher contributions alongside Austria, Sweden and Denmark.
Dutch officials argue countries on the west coast of Europe, including the Netherlands, Ireland, Denmark and Spain will already be hit in the pocket by Britain’s decision to unshackle itself from the bloc.
The act of defiance show the cracks starting emerge in the 27-member bloc, who have put on a united front in Brexit talks.