Cost pressures#

Tertiary Education and Training enrolments – Increased volume funding#

• $111.402 million operating funding.

This initiative provides funding for forecast tertiary education and training volume in 2025 and 2026 and approximately 175 additional Youth Guarantee places per year, which is a 3% ongoing increase. This will ensure the system can respond to expected demand, in line with the Government’s focus on providing learners with skills for employability and productivity and reducing the number of young people who are under-or-unemployed.

This additional funding for volume will enable the Tertiary Education Commission to fund 99% of total forecast volume in 2025 and 2026.

Managing tertiary education and training system pressures – Targeted cost adjustments to tertiary education tuition and training subsidies#

• $212.531 million operational funding.

This initiative provides funding for a 3% increase to tertiary education and training subsidies for foundation levels and for priority delivery at degree level and above. A further $17.0 million is provided for increases to subsidies for priority delivery at Levels 3 to 7 (non-degree).

Priority areas targeted for subsidy increases include:

• science and clinical psychology
• medical imaging
• medical laboratory science
• optometry
• medical radiation therapy
• veterinary science
• medical undergraduate
• mathematics
• nursing degree
• agriculture and horticulture
• priority engineering
• initial teacher education
• foundation education funds (excluding Māori and Pacific Trades Training)
• at Levels 3 to 7 – targeted at areas aligned with trades, agriculture, engineering and health sciences.

Delivery at degree level and above will receive an additional subsidy increase as part of the ‘Managing Tertiary Education and Training System Pressures – Targeted Cost Adjustments to Higher Education Subsidies’.

Managing tertiary education and training system pressures – Targeted cost adjustments to higher education tuition subsidies#

• $64.351 million operational funding.

This initiative provides funding for a 1.75% increase to tertiary education subsidies at degree level and above (Level 7 to 10) for targeted areas of provision. This will provide additional funding from 2026 onwards and support higher education providers to sustain quality of provision and further invest in targeted areas.

Priority areas targeted for subsidies include:

• science and clinical psychology
• medical imaging
• medical laboratory science
• optometry
• medical radiation therapy
• veterinary science
• medical undergraduate
• mathematics
• agriculture and horticulture
• priority engineering
• initial teacher education.

This increase builds on the subsidy increase for all levels of study provided by the ‘Managing Tertiary Education and Training System Pressures – Targeted Cost adjustments to Tertiary Education Tuition and Training Subsidies’ initiative.

Industry standard-setting functions#

• $10 million operational funding.

This initiative ensures continuity of funding for industry standard-setting functions under the new model for industry standards-setting from 1 January 2026. Ongoing funding is being considered as part of the broader transition of the vocational education and training sector.

Managing tertiary education and training system pressures – Increased tuition fees#

• $19.805 million operational funding (vote revenue).

This initiative provides funding to enable Tertiary Education Organisations to increase tuition and training fees charged to learners by up to a proposed 6% in 2026, to support providers to address ongoing costs and maintain the quality of tertiary education delivery.

This incurs Crown expenditure through the final-year Fees Free policy in Vote Revenue and the Student Loan Scheme. Flow-on impacts on Student Loans in Vote Revenue and Vote Social Development are managed outside Budget allowances.

Precommitments#

Workforce Development Councils – extending funding#

• $15 million operational funding.

This initiative supports the continued performance of Workforce Development Councils’ statutory functions between 30 June and 31 December 2025.

Savings and reprioritisation#

Prime Minister’s Scholarships – Returning funding#

• $15 million operational funding.

This savings initiative removes all funding from the Prime Minister’s Scholarships for Asia and Latin America and returns the funds to the centre to fund other Government priorities. The scholarships will no longer be available from 1 July 2025. Current scholarship holders and applicants for the April 2025 scholarship round are not impacted.

Tertiary Education Commission balance sheet funding – Reprioritisation#

• $62 million capital funding.

This savings initiative returns funding from the Tertiary Education Commission’s Balance Sheet facility. This funding is reprioritised to help fund an expected increase in forecast demand for tertiary education from 2025 onwards.

Other Tertiary Education Initiatives#

The following initiatives list tertiary education initiatives that went through the Budget technical process or initiatives led by other agencies.  

Final-year Fees Free – Increased cost#

• $103.252 million operational funding (vote revenue).

This initiative provides funding for increasing costs to the final-year Fees Free scheme. This increase in cost arises from more learners being eligible than initially forecast.

Student Loans – Indefinite freeze on the repayment threshold#

• $65 million operational funding (vote revenue).

This savings initiative reflects Cabinet’s decision to indefinitely suspend the annual inflation adjustment of the student loan repayment threshold. This will mean the student loan repayment threshold will remain at the current income level of $24,128 per annum.