Universities have warned fees-free study could push some students to apply for courses they are unlikely to pass.
Tension between the sector and the Labour-led Government over the flagship scheme is revealed in letters sent to Education Minister Chris Hipkins, now released to the Herald under the Official Information Act.
They include a warning universities will be forced to ask for hundreds of thousands of dollars of extra funding to help meet an administrative "burden" accompanying the policy.
Hipkins has hit back - flatly rejecting any request for cash and saying the vast bulk of administration is done by the Tertiary Education Commission.
University of Auckland vice-chancellor Stuart McCutcheon wrote to Hipkins in December, in his capacity as chair of Universities NZ, the body that represents all eight universities, to warn of "a most unfortunate and no doubt unintended anomaly" of the fees-free policy.
Foundation courses are designed to help disadvantaged students, including Māori and Pacific New Zealanders, into degree programmes, and as such had much lower fees, McCutcheon wrote.
"Students who take a university foundation course will enjoy a fees remittance of as little as $700 in their first year of tertiary study ... by contrast, those entering directly into degree programmes will enjoy the benefit of up to $12,000 in remitted fees.
"We believe that this outcome is grossly inequitable … it will also create perverse incentives for students to seek entry to degree programmes for which they are not adequately prepared and in which they are unlikely to succeed without special preparation."
Labour's policy offers a free year of education or training to anyone who has done less than half a fulltime year of post-school education or training. The intention is to implement three fees-free years from 2024.
In a separate Universities NZ letter to Hipkins, also sent in December, McCutcheon said the decision not to run the new system through StudyLink had created "overheads for a system already under real financial pressure".
That included changing systems, increasing the size of call centres to handle increased inquiries and double-checking student eligibility. Vice-Chancellors had asked staff to systematically identify and track all additional costs, McCutcheon told the Minister.
"Assuming the figures are as significant as early estimates indicate (namely in the hundreds of thousands of dollars), we will be asking the Government to reimburse these costs."
McCutcheon told the Herald the total costs were not yet clear, but universities still expected to ask for reimbursement: "This is putting a load on to the institutions. There is no doubt about that."
In his response letter, Hipkins said the Government recognised the importance of bridging courses, and not all students in them would use their full eligibility for fees-free study, with those in part-time study able to carry some eligibility forward.
He told the Herald he was happy to talk to McCutcheon about the concerns, but there was a need to be consistent about the criteria across all institutions.
He ruled out paying universities extra for administrative costs: "I'm pretty confident that the universities receive sufficient funding now to be able to meet the cost as part of their business-as-usual costs."
Hipkins said using StudyLink would have required a law change, and force some people to take out a loan, which would be written off later, when they would otherwise not be borrowing.
"It would also have meant a group of students would not have been able to access fees-free. Muslim students, for example, under their religious beliefs aren't able to borrow money. So they wouldn't have been able to access it.
"The vast bulk of the administrative burden – ie, checking eligibility – sits with the Tertiary Education Commission and not with the institutions."
Under the current system, the Government estimated how many students are eligible for fees-free study at each institution, and then effectively bulk-funded accordingly. Later this year there will be a reconciliation to deal with any "unders and overs".
National's tertiary education spokesman Paul Goldsmith said the issues raised by the vice-chancellors were valid, and reflected the rushed and ill-thought-through nature of the policy. That had created significant tension with the sector, he believed.
"If you just charge in and make changes without any consultation at all, then there is a very high risk of these unintended consequences."
On enrolment numbers, Hipkins said he expected an increase in tertiary participation over time, but that was only one measure of success. Modelling participation changes was extremely difficult. "I think we built in a five per cent buffer. But it will be what it will be."
Hipkins yesterday released a work programme for the next three years, which includes a review of NCEA and Tomorrow's Schools legislation.