The Tertiary Education Commission (TEC) will cut 70 jobs as the organisation aims to take a "lighter-hand" in the sector.
Chief executive Roy Sharp announced the cuts today as part of a new business plan.
"The quality and relevance of the learner experience remains at the heart of what we do," Dr Sharp said.
"However, TEC recognises that we add most value by assisting tertiary education organisations to manage themselves."
It made sense to prioritise the agency's efforts on a few organisations that required additional support while offering streamlined services to those that were managing well, Dr Sharp said.
"A lighter hand would mean a more tailored approach and using different forms of engagement."
However, the move has prompted quick criticism from the Public Service Association (PSA), which said crucial front-line advisers will be lost in the cuts.
PSA national secretary Brenda Pilott said redundancies were at odds with government demands for value for money and a stronger focus on front-line services.
"The TEC was set up because of repeated business failures in the tertiary sector which left thousands of students stranded without a qualification or any redress for the considerable investment they had made, in both time and money," Ms Pilott said.
"We fear that the 'lighter hand' approach promised by the TEC has the potential to see us return to those days."
Ms Pilott said there was already a growing demand for tertiary courses because of the shrinking job market which meant more private establishments were likely to spring up offering skills training.
"Without robust systems of accountability, there is the potential for public money to be wasted, with students paying the price."
The Labour Party has also slammed the job cuts, saying it represented a backwards step in the drive to give New Zealanders better skills.
Labour's Tertiary Education spokesperson Maryan Street said it made a mockery of the Government's claims it is capping, not slashing the public service.
"The TEC is responsible for allocating more than $3 billion of taxpayers' money every year and was set up as a result of concerns that money wasn't always being spent wisely," she said.
"This is not a 'value for money' move, rather it is likely to have the opposite effect and reduce the accountability TEC has introduced."
Associate Tertiary Education spokesperson Carmel Sepuloni said it was particularly disappointing that over half of the dedicated Maori and Pacific positions in TEC had been axed.
"It raises serious questions about whether this Government has any real commitment to upskilling our Maori and Pacific communities and what else it has in store for them."
