Victoria University has backtracked on charging students $150 a week for rooms in halls of residence they can't live in.
Accommodation fees were waived to support students through the Covid-19 lockdown but they were told at the end of last week they would need to start paying up as the country moved to alert level 3.
The move sparked a public backlash, uniting MPs and councillors across the political spectrum, and students who threatened a rent strike.
Vice Chancellor Professor Grant Guilford said earlier this week the university would delay the charge while the situation was clarified.
But Victoria University has now updated its website saying it has extended the 100 per cent fee discount it offered in lockdown until May 11, the day the Government will decide whether to extend alert level 3 or move New Zealand to alert level 2.
However, it also said the university may decide to move from a full discount to a partial discount of these fees to offset the costs of maintaining the halls ready for when students return.
On its website, the university noted halls of residence incurred costs whether or not students were there.
Since lockdown Victoria University has continued to pay 80 fulltime permanent hall staff, and more than 100 residential assistants most of whom are students.
Other ongoing costs included things like lease costs, insurance, maintenance, providing security services and planning for the reintroduction of students to hall life under alert level 2 requirements, the university said.
Victoria University of Wellington Students' Association congratulated students who "pushed back" on the charge.
"The collective work of students has really paid off and shows the power of the student voice when we speak out. Big kudos to all you as well as the many supporters. We are immensely proud," the association posted on Facebook.
Green Party tertiary spokesperson Chlöe Swarbrick said the result demonstrated the huge collective power in student voice to push for political change.
"We will continue to advocate and investigate on behalf of students being unfairly treated by their education institutes. Bottom line - students aren't willing to take the crap anymore, and accessible education is a right."
City councillors Fleur Fitzsimons and Tamatha Paul, both former presidents of the Victoria University of Wellington Students' Association, wrote to Guilford on Monday.
They said they were "shocked and dismayed" and hoped the decision would be reversed to ensure students were not paying for costs they were not benefiting from.
Wellington-based National list MP Nicola Willis wrote to Guilford yesterday sharing similar concerns, saying the issue was a matter of fairness and reputation.
"The current approach being pursued by VUW shows a lack of reasonableness towards those in your care."
Hutt City mayor Campbell Barry wrote to Guilford on Wednesday saying he was deeply disappointed at the university's approach to charging students.
"It demonstrates a lack of compassion during this time of crisis. Students and their families already face financial struggles and stress, without the added pressure of the proposed placeholder fee."
The university said any student could apply to its hardship fund for an accommodation grant to assist them with paying any fees.
So far this year Victoria University has already paid more than $500,000 in student support and the budget cap has been lifted for its hardship fund.