Even facing potential closure, the 2016 graduation at Whangarei's Design School was cause for celebration.

Managing director Mike Saywell said 18 students graduated with level 2-4 certificates last week, and another 30 were given their progress results.

Many of these wanted to continue studying next year, but it was unknown whether the school would be able to remain open, after an announcement its Government funding could be cut.

Mr Saywell said the atmosphere was one of "enthusiasm and celebration" as family and friends, along with Mayor Sheryl Mai and Te Tai Tokerau MP Kelvin Davis packed into the school's studio.

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"The quality of work on display is exceptional for foundation level courses and demonstrates the fantastic talent in this region. This is why we opened in Whangarei," Mr Saywell said.

The Design School, at the corner of Walton and Robert streets, opened in 2014 and teaches NCEA level 2 through 4 design, fashion and graphics courses. The level 2 courses were fees-free, but the Tertiary Education Commission recently indicated it would not continue to fund these next year.

Fellow Northland tertiary provider NorthTec had received similar news and may have to cut up to half its level 2 courses in 2017.

Level 2 courses were particularly valuable for students who had left school without a formal qualification.

Mr Saywell said the thought of the school closing was "heartbreaking", but that he could accept it so long as something equally good was funded in Northland in its place: "So long as there isn't a gap, I can live with that."

The school had about 40 graduates in its first year, and another 40 this year. Next year's enrolments were almost full already.

TEC chief executive Tim Fowler said the commission was yet to formally confirm its funding, so he was limited in what he could say.