The Government is preparing the ground to scrap the fee cap at tertiary educations, put restrictions on who can study and tell institutions what subjects they can teach, Labour Party tertiary education spokeswoman Maryan Street says.
Prime Minister John Key, during his statement to Parliament today, signalled the sector was in for a shake up and said there were "increasingly urgent" problems in tertiary education.
Last month Mr Key separated off tertiary education from Education Minister Anne Tolley's responsibilities and gave it to high-flyer first term MP Steven Joyce.
Today Mr Key highlighted courses with high drop out rates and students who took financial support but did not try or were studying for personal satisfaction rather than in order to get a job.
"We are concerned that as a consequence of previous ad-hoc policy changes, there are a large number of tertiary programmes, particularly below degree level, that have drop-put rates as high as 50 percent, and that some of these programmes fail to properly equip students for the jobs they seek."
The Government would make policy changes to ensure providers offered courses that were relevant to job opportunities and that courses were high quality, he said.
The Government would look at policy settings around student support to ensure "taxpayers' generosity is not being exploited by those who refuse to take their tertiary studies seriously, or who show little inclination to transition from tertiary training into work."
Mr Key said universities suffered under an inflexible and bureaucratic funding and policy framework.
Ms Street said that sounded like an argument for increasing fees.
"That makes me wonder if they are going to provide universities with the opportunity to lift fee maxima, so put up university fees." The Labour Government set a maximum fee policy in 2004 to ensure universities fees did not get out of control.
Ms Street was concerned by the idea of penalising students who failed papers.
"Will students only be able to access student allowances if they pass everything? What if they need more support rather than to get clobbered?"
Students did not want to fail, she said. Many students were people who lost their jobs and were studying again for the first time in years or for the first time.
"(They) are bending over backwards to achieve academically, sustain a family, and work part time as well as study in order to make ends meet." Some students chose an area that was wrong for them and switched programmes.
"Who is going to decide if a student fails because they don't 'take their studies seriously' or whether that person is simply someone that needs more support to succeed?
"If we go to higher fees, if we go to less in the way of allowances, we are going to end up with fewer people going to universities and polytechnics and then we are going to have progress and self improvement for the few, not the many."
She said while she supported high quality courses there was more to upskilling a workforce than tailoring to meet the job market's immediate needs.
She did not think general education degrees like arts should be affected when research showed they provided lateral and creative thinkers even though there was no direct job opportunity.
New Zealand Union of Students Associations co-president David Do said the Government appeared to be hinting at tightening eligibility for loans and allowances. "This will hit students who are already struggling to make ends meet," he said.