First-year fees-free scheme paid universities $1.25b over seven years

The Tertiary Education Minister says Labour’s fees-free scheme didn’t meaningfully lift participation or improve equity for students, as new figures show universities pocketed $1.25 billion from it over seven years.

A briefing from the Tertiary Education Commission to Penny Simmonds from July, obtained by Newstalk ZB under the Official Information Act, said first-year fees free covered $2.053b in fees from 2018 to 2025.

Of this, $1.25b went to universities, $440 million to Polytechnics, $333m to private training establishments, $28m to industry training organisations, and $3m to Wānanga.

Simmonds was told first-year fees free supported 307,185 learners in 2018 to 2025.

In a statement, Simmonds said while the scheme reduced student debt, “the evidence shows it didn’t meaningfully lift participation or improve equity, the goals it was set up to achieve”.

“At that price, that’s not a good enough return,” the minister added.

Green MP Francisco Hernandez stood by the scheme, saying it boosted Māori participation in tertiary education by about 20% – “a really substantial increase”.

“The gains of it in terms of being able to reduce the loan costs for students and reduce barriers to participation are worth keeping,” Hernandez said.

The Green MP added Labour refusing to commit to re-instating the scheme was a “kick in the guts”.

“It just shows that students fundamentally cannot trust the Labour Party to have their interests in mind. This was something that Labour campaigned on in 2017 and 2020, now they’re saying it’s not a priority,” Hernandez added.

Labour Tertiary Education spokesman Shanan Halbert said “the blame squarely should sit with the National Government and Penny Simmonds, both for the $1b lost to young people in this country who we desperately want to build a life here, but secondly because of a fees increase of 19%”.

Budget documents reveal not all of the more than $1b saved from ending the final-year fees-free scheme has been re-invested directly into the sector.

“We cannot continue to burden young people with student loan debt like we are now,” Halbert said.

The Labour MP said the party would not bring fees-free back.

“I’m looking forward to announcing our policies that will focus on supporting students. We have a proven track record under Labour of investing in young people, making sure that tertiary education is accessible. I want to ensure that it’s affordable and that people aren’t burdened by the level of debt that they’re experiencing under this government.”

Simmonds added that official assessment drawing on the first-year scheme’s results, international evidence and completion and fiscal data, suggest “fees-free settings don’t tend to change learner behaviour”.

Simmonds said students who reach their final year are already highly likely to finish, and reimbursing fees after completion “doesn’t remove the up-front cost barriers that stop people studying” – which is why the scheme is ending from the end of 2026.

Fees were paid to tertiary organisations, covering up to $12,000 for each eligible learner’s first year of study or first two years of work-based learning.

Officials said the average financial benefit for each learner was $5046.21, and noted the average financial benefit was highest at universities.

Learners most commonly got fees-free for “society and culture” qualifications, followed by management and commerce, and engineering. Officials said 71% of those who got the subsidy were European, 19% were Māori, 14% were Asian, and 12% were Pacific Peoples.

A majority of 53% of fees-free learners identified as female.

Ministry of Education data shows new fees-free learner numbers for female students rose 7% while males were up 3%, and Māori increased by 18%, the largest increase across all ethnic groups.

The fees-free scheme is being scrapped at the end of 2026, announced by Winston Peters, who at the time conceded it was a “Budget leak”.

Those who complete an eligible qualification or programme in 2026 will remain able to apply for fees free within 12 months of completing their course, up to December 31, 2027. People who complete their qualification or programme after 2026 will not be eligible for the scheme.

Hernandez claimed fees free was “not coming to an end because the election’s coming up,” and said the Greens are keen on “expanding” the scheme.

Paid placements are also a part of the Green Party manifesto this year, as Labour campaigns on guaranteeing jobs for graduate nurses.

Simmonds said funding towards the fees-free scheme will be reprioritised into support that reaches young people more directly, “including additional Trades Academies and Youth Guarantee places into further education, trades training and employment”.

“Support for access to tertiary education will continue to be provided, for example through New Zealand’s student loan system,” Simmonds added.

Azaria Howell is a multimedia reporter working from Parliament’s press gallery. She joined NZME in 2022 and became a Newstalk ZB political reporter in late 2024, with a keen interest in public service agency reform and government spending.