New Research Reveals Fees-Free Scheme's Shortcomings in New Zealand Tertiary Education

The Fees-Free scheme, launched in 2018 by the previous Labour government, promised to make the first year of tertiary study tuition-free for eligible first-time learners, aiming to boost participation especially among underrepresented groups. Costing around NZ$350 million annually at its peak, the policy covered up to $12,000 in fees for provider-based tertiary education at Levels 3 and above or work-based learning. However, a new study from Auckland University of Technology (AUT) researchers has exposed its limited effectiveness in widening access to universities and other tertiary providers in New Zealand.

Tertiary participation rates among school leavers hovered around 52-57% from 2015 to 2019 cohorts, showing a pre-existing downward trend of about 1.2 percentage points per year that the scheme failed to reverse. This comes amid government plans to scrap the first-year model for new entrants after 2024, shifting to a final-year Fees Free from 2025, citing fiscal pressures and poor outcomes for disadvantaged students.

Background on New Zealand's Fees-Free Policy

New Zealand's tertiary education system relies heavily on government subsidies, with students contributing 15-20% via fees, financed through interest-free loans under the Student Loan Scheme for domestic students studying in-country. Means-tested allowances further support living costs. The Fees-Free scheme targeted first-time learners with little prior study, covering one year (120 credits) or two years of apprenticeships, starting January 2018 for the 2017 school leaver cohort.

Objectives included increasing participation, reducing debt (achieved modestly, with borrowing for fees dropping from 67% to 58% by 2022), and promoting equity for Māori, Pacific peoples, and low socio-economic (SES) groups from decile 1-4 schools. Total claimants peaked at over 246,000 by 2023, but uptake among disadvantaged university study slumped to historic lows in 2024. By 2024, Māori tertiary participation stood at 16%, Pacific at 15%, compared to 10% for Europeans, showing persistent gaps.

The Landmark AUT Study: Methodology and Data

Led by Lisa Meehan, Director of the New Zealand Policy Research Institute at AUT, and PhD candidate Cristóbal Castro, the April 2026 working paper analyzed over 251,000 school leavers from 2015-2019 cohorts using Stats NZ's Integrated Data Infrastructure. A cohort-based event study with linear probability models compared pre- (2015-2016) and post-policy (2017-2019) outcomes, controlling for gender, age, ethnicity, NCEA levels, and school decile. Trend adjustments accounted for the ongoing participation decline, with placebo tests validating assumptions.

Outcomes measured: tertiary participation within two years of leaving school, programme level (bachelor's vs. certificates/diplomas), year-two retention, and six-year completion. Heterogeneity examined SES (low decile 1-4), ethnicity (Māori, Pacific), and gender. For full details, see the AUT working paper.

Overall Enrollment Trends: No Reversal of Decline

Before Fees Free, participation fell from 57.3% (2015 cohort) to 54.2% (2016), continuing to 52.2% (2019). Post-policy, raw declines were 1.1pp (2017-2018) and 0.1pp (2018-2019), aligning with the -1.2pp/year trend. Trend-adjusted effect: a statistically marginal +0.8pp (p=0.030), translating to perhaps 400 extra enrolments per 50,000 cohort—negligible at over $800,000 per additional student. No shifts to higher-level study like bachelor's degrees, nor improvements in retention (e.g., +0.3pp year-two, insignificant) or completion.

University domestic enrolments grew modestly post-COVID (e.g., +1.5% 2024-2025), but overall tertiary EFTS rose only 0.9% amid falling headcounts, reflecting no sustained Fees Free boost.

Equity Gaps Persist: Limited Benefits for Māori, Pacific, and Low-SES Students

The scheme exacerbated disparities. Low-SES (decile 1-4) students saw relative participation drops of 1.5-2.5pp post-2017 (p<0.05), widening the base -4.2pp gap; bachelor's enrolment fell 3pp, retention 2.3pp. Māori (base gap -8pp) and Pacific (-1.5pp) showed no significant gains, with gaps explained largely by school achievement. In 2024, disadvantaged university Fees Free uptake hit lows, despite higher overall tertiary rates for Māori/Pacific (16%/15%). Completion lags: 50% Māori vs 62% non-Māori at bachelor's+.

Women saw minor retention gains (+2.2pp 2019, p<0.05), but overall, the policy subsidized those already participating, missing equity goals.

Photo by Markus Winkler on Unsplash

Government's Response: Scrapping First-Year Model Amid Fiscal Strain

Finance Minister Nicola Willis confirmed in May 2026 the first-year scheme ends for new cohorts post-2024, saving hundreds of millions amid deficits since 2019. Total spend exceeded $1.5 billion with no enrollment lift or equity progress. ACT's David Seymour noted it didn't increase disadvantaged attendance. Winston Peters leaked the Budget cut, calling it inefficient.

Official analysis concurs: fees-free internationally shows limited behavioral change, high deadweight (many would study anyway), benefiting privileged more.

Final-Year Fees Free: A Targeted Shift?

From January 2025, Fees Free covers the final year (Levels 3+) or two years work-based, paid post-completion up to $12,000. Aimed at boosting completion (61% overall, lower for Māori/Pacific), but evidence suggests minimal incentive effect as attrition happens early. Savings: $880m 2023/28 vs first-year, offset by $230m extra loans. Critics question if it addresses root barriers.

Details at FeesFree.govt.nz.

Stakeholder Perspectives: Mixed Reactions

Students decry it "sneaky and unfair," fearing debt amid living costs, youth unemployment. PM Luxon called it a "quite a failure." Unions and opposition lament lost access, but researchers like Meehan/Castro advocate earlier interventions: school achievement, info, family support. Universities NZ notes parity gaps persist despite efforts.

• Māori/Pacific first-year pass rates improving at Auckland Uni (parity closed for Pacific).
• But overall, scheme didn't accelerate equity.

Deeper Barriers Beyond Fees in NZ Context

Fees were minor (24% costs); loans/allowances mitigated. Key hurdles: NCEA achievement (explains most ethnic gaps), living costs, work needs, info deficits, confidence—pre-enrollment. Strong job market pulled youth away. Policy too late, universal, blunt.

International Lessons and NZ Comparisons

High-fee countries (e.g., US) see boosts from waivers; low-upfront like NZ/Australia show little. Ecuador/UK: short-lived effects, deadweight 70-90%. Targeted aid better for equity.

Photo by Roman Kraft on Unsplash

Implications for New Zealand Universities and Colleges

Universities face enrollment pressures (domestic -3.5% 2025), reliance on internationals (+15%). Shift to final-year may aid completion (e.g., masters +17% EFTS), but unis urge vocational/apprenticeship focus. Job markets demand skills; check NZ university jobs for opportunities.

Future Outlook: Pathways Forward

Target early: scholarships, bridging, career advice. Monitor final-year effects on completion (Māori 50% vs 62%). With debt median 10 years, focus earnings premium (97-161%). Policymakers eye apprenticeships, lifelong learning. For aspiring lecturers/professors, explore faculty roles.

Balanced reform needed for true access parity.