Did $2 billion in free fees actually train anyone employers were hiring for?

The definitive accounting is in, and it is not flattering

A Tertiary Education Commission briefing released under the Official Information Act on 22 September 2026 has put a hard number on the first-year Fees Free scheme. It covered $2.053 billion in fees from 2018 to 2025 across 307,185 learners, at an average financial benefit of $5,046.21 per learner.

The money did not spread evenly. $1.25 billion went to universities, $440 million to polytechnics, $333 million to private training establishments, $28 million to industry training organisations and just $3 million to Wananga. The single biggest tranche of taxpayer money flowed to the pathway chosen by the smallest share of school leavers.

Tertiary Education Minister Penny Simmonds used the release to declare the scheme a failure. It ends from the end of 2026.

The scheme did not do the one thing it was built to do

Fees Free was sold on two promises, lifting participation and improving equity. The official data says it delivered neither. Education Counts statistics show tertiary participation was 10.4 percent of the population aged 15 and over in 2024, down from 10.8 percent in 2023. The 2024 cohort of new fees-free learners was actually 13 percent lower than the year before.

The Ministry of Education’s own analysis, reported in October 2025, found the 2018 introduction “did not noticeably change” the long-run decline in participation, and concluded that “fees and fees-free policies have no real effect on learner behaviour.” The TEC’s own assessment, cited on 22 September, reached the same view, that “fees-free settings don’t tend to change learner behaviour.”

AUT researchers put a price on the futility, estimating the scheme may have changed the enrolment decisions of only about 400 students per cohort, which works out at more than $800,000 for each decision that actually shifted.

A scheme sold on equity that subsidised the comfortable

The demographic breakdown undercuts the equity case entirely. 71 percent of subsidy recipients were European, and the most common field of study was society and culture, followed by management and commerce. The Ministry’s analysis described a “high deadweight cost”, covering fees for learners who could have financed them anyway, and called the scheme “inherently inequitable” at degree level because all taxpayers fund it while certain groups benefit disproportionately.

Worse, the groups the scheme was meant to help most were the least likely to finish. Completion within the scheme averaged 62 percent, but only 50 percent for Maori and 48 percent for Pasifika.

Simmonds told Mike Hosking on 22 September that the scheme also encouraged poor behaviours, pointing to young people who had planned to enrol in trades courses opting instead for a subsidised year at university. “At that price, that’s not a good enough return,” she said.

What business should actually take from this

The defenders have one real argument. After 2018 there were around 31,600 fewer students borrowing for fees, a 20 percent drop, with total borrowing down $194.2 million. That is a genuine debt-reduction outcome. But it is not a participation or equity outcome, and it accrued mostly to students who were always going to study.

For employers the point is sharper. The skills shortages that bite are in trades, construction, engineering and technical roles. Youth unemployment among those not in education or training sat at 14.4 percent at Budget 2026, and only 30 percent of school leavers head to university. The $2 billion largely bypassed the pipelines that matter to the labour market.

The replacement is better aimed, and much smaller

Scrapping the scheme frees over $1 billion, roughly $300 million a year. Some is being redirected to doubling Trades Academy places to 20,000 by 2030 and adding 1,000 Youth Guarantee places for school leavers with few qualifications. Regional Development Minister Shane Jones said Fees Free “did not increase enrolments or completion rates, especially for those from low-income backgrounds.”

The redirection is smarter money, targeted at vocational pathways rather than universal subsidy. Whether it is enough to close workforce gaps a decade of blunt spending never touched is the open question. The lesson for anyone watching public money is older than this scheme, that intent is cheap and outcomes are expensive, and confusing the two costs $2 billion.

Sources

• Newstalk ZB: First-year fees-free scheme paid universities $1.25b over seven years (2026-09-22)
• Newstalk ZB / AudioScrape: Penny Simmonds criticises Fees Free scheme as new briefing reveals it cost over $2 billion (2026-09-22)
• Newsroom: Scrapping fees-free study saves Govt over $1b in Budget (2026-05-28)
• NZ Herald: The failure of the fees-free policy and how the Government reset might worsen equity (2025-10-14)
• AUT News: Did fees-free help widen access to uni?