The coalition government will scrap the fees-free university scheme in the Budget on 28 May, with New Zealand First leader Winston Peters revealing the decision in what he called a “Budget leak” on Newstalk ZB on Friday evening.
Asked directly whether the coalition planned to cut the scheme, Peters told the station, “I’ll give you a Budget leak right here, right now, the answer is yes.” He said the money currently flowing through the universities scheme would be redirected. “We are going to reshape and repurpose it for the trades and all sorts of industries where we do need it and where we can get a far better payback for our money and pay far less money doing it,” Peters said.
Finance Minister Nicola Willis confirmed the decision in a statement on Friday, telling RNZ that “ongoing coalition negotiations have led to good Budget policy decisions that further the immediate and long-term interests of New Zealanders” and adding that the government “will have more to say about this in due course”. Willis confirmed that students who complete their qualification this year will still be eligible for the existing final-year payment, providing a transition window for those already enrolled.
The fees-free policy was the signature tertiary education promise of Dame Jacinda Ardern’s first Labour-led government and took effect at the start of 2018, covering the first year of study at universities, polytechnics, wānanga and on-the-job training. It was scaled back substantially in 2024, when the National-ACT-NZ First coalition shifted the entitlement from the first year to the final year of study from 1 January 2025, with payments worth up to $12,000 for learners completing their first qualification at Level 3 or above on the New Zealand Qualifications and Credentials Framework. The shift to a final-year model was projected by Treasury to save around $877 million over the forecast period, according to information published on the Beehive website when the change was announced.
The first round of final-year payments was due to flow this year to students who completed their qualification in 2025, meaning the scheme has barely had a chance to operate in its redesigned form before being earmarked for closure. Officials are still working through how the legislation underpinning the scheme will be unwound and what transitional arrangements will look like for students part way through study.
Peters’ comments suggest some of the savings will be diverted into vocational training, an area New Zealand First has been pushing the coalition on since taking office. The party has argued that the country has a chronic shortage of skilled trades workers in construction, engineering, electrical and infrastructure roles, and that subsidising a final year at university produces poorer returns than backing apprenticeships and trade qualifications. The detail of any new trades package, including whether it will be modelled on existing Apprenticeship Boost-style payments or take a different shape, has not been released.
The way the announcement was made has drawn its own attention, with a senior coalition partner publicly disclosing a Budget item in a radio interview before the Finance Minister had laid it out herself. Budget secrecy has long been a convention in New Zealand politics, partly to protect markets and partly to give the Finance Minister control of the message on Budget Day. Peters’ framing of his comments as a “leak” was clearly a deliberate scoop rather than an accidental disclosure, but it underlines how the three coalition parties are increasingly willing to use the run-up to Budget 2026 to stake out their own claims with their respective voter bases.
Universities New Zealand and the New Zealand Union of Students’ Associations have both warned in the past that pulling fees-free out of the system would lift the up-front cost of a degree and could discourage students from low-income households from enrolling, particularly first-in-family students who rely on the certainty of a fully funded year. Universities have also pointed out that the final-year design already excluded most postgraduate study and only kicked in once students had effectively committed to a full programme, limiting the scheme’s role as a participation lever. Whether the Budget on 28 May includes any compensating measures, such as a lift in StudyLink hardship grants or course-related costs, will be a key question for the sector.
For the coalition, the political calculation is that fees-free has never been universally popular. Successive evaluations have found the original first-year scheme had little measurable effect on enrolments or retention, and a substantial share of payments went to students who would have studied anyway. National campaigned in 2023 on tightening the policy, and ACT has long argued that targeted support for those most in need is a better use of public money than a near-universal subsidy.
For Labour and the Greens, who built the original policy, the announcement is likely to become a flashpoint in election year. Both parties have signalled they will go into the 2026 campaign defending public services and pushing back against what they describe as a coalition focused on “cuts and giveaways”. Te Pāti Māori has previously argued that scrapping fees-free will hit Māori and Pasifika students hardest, given they are disproportionately represented among first-in-family tertiary learners.
The full picture, including how much the government expects to save by closing the scheme, where the redirected money will land, and how the transition will be managed for students currently enrolled, will become clearer when Willis delivers the Budget in Parliament on Thursday 28 May.
With the 2026 general election now only months away, decisions like this one will sharpen the lines between the parties. If you want to see how your own values line up with each party’s policies on tertiary education, tax and the cost of living, you can use our 2026 voting tool to compare positions side by side.
What do you think — is scrapping the fees-free scheme and redirecting the money into trades the right call, or are we cutting one of the few rungs on the ladder for low-income students just as a degree gets harder to pay for? Let us know in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
Leave a Reply