"I started doing stuff I didn't even know I could do. It was a big eye-opener coming in, meeting all these new people," Mr Downes said.
He had been planning to re-enrol next year, but said he may now have to look at other options.
Fellow student Michelle Robinson had been working in administration before starting her fashion course this year.
"I think it's a shame it's closing because a lot of students who are creative may not fit in at school," she said. "Here, you find a place where you are accepted."
The school had about 40 graduates in its first year, and had another 40 about to graduate. Next year's enrolments were already almost full.
Mr Saywell said if something else equally good was funded in the school's place, he would be happy: "So long as there isn't a gap, I can live with that".
"The spin-off is it brings young people into the CBD, it's a win-win," he said.
Mr Saywell said he acknowledged that TEC funding was competitive.
"We've gone from thinking it was all going well - though knowing this could happen, don't get me wrong - but it's going to be quite heartbreaking."
TEC chief executive Tim Fowler said the commission was yet to formally confirm its funding, so he was limited in what he could say.
"We have had initial conversations with all applicants to give them an early indication of likely funding levels, and will shortly be sending final confirmation of the results of their application," he said.
Mr Fowler said the outcome of the competitive process would be published online.