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It was revealed yesterday that enrolments in the government's flagship educational programme stood at 50,000 this year, instead of the 80,000 initially forecast, and a sizeable part of the funding has been reallocated to polytechs.
Victoria University Students Association president Tamatha Paul warned the Labour coalition not to backtrack on its 2017 election promises to implement the scheme, or face a backlash by students.
Under the scheme, the first year of full-time study for school leavers is paid for, and those who have committed fewer than six months' tertiary study in the past also qualify.
Labour's campaign policy in 2017 was to introduce fees-free at the start of 2018, then gradually extend it to two years' free in 2021 and provide three years' free in 2024.
Ms Paul told Morning Report the scheme was proving beneficial to students.
"We know that this policy is being extremely helpful," she said.
"We're having conversations with students consistently, who are saying they wouldn't have come to the university if it wasn't for this policy, especially students coming from disadvantaged backgrounds and especially those getting scholarships who are now dedicated that money towards accommodation and living costs, instead of tertiary fees."
"So I think they should keep their commitments and keep the funding where it is, were promises were made... Tertiary education, whether it's higher training, university or polytechnic, should be affordable for everybody."
However, Ms Paul said she was already disappointed the government was redirecting $200 million from the $1.9 billion allocated to scheme over four years, towards reforming vocational training.
"I don't think it's a good idea to assess the policy after one year... why are we assessing it and making such massive cuts, we do need to wait and see how it pans out," she said.
She said if the government caved into opposite pressure to compromise on implementing the scheme, students would react with a backlash.
"I know for a fact this is why a lot of people voted for them because of that.
"For me, I'm the first in my family to go to university and I can see how much having a degree can change your family and the community you come from.
"Tertiary education is so important and if they were to backtrack it would be so disappointing."
Earlier, Finance Minister Grant Robertson told Morning Report enrolments had been falling between 2012 and 2107 and had stabilised after the fees-free scheme was introduced.
He said the policy benefited 50,000 people and had relieved students' financial burdens.
"There was an element of this policy that was about getting more people in, but it wasn't the only purpose of the policy," he said.
"A part of this was about trying to relieve some of the financial burden on people who were going into post-secondary education and training and we do know that that's happened.
"We've got 30,000 fewer people getting loans for fees and about $190 million saved in student loan borrowing."
The minister insisted that the policy was a justified investment in the economy.
"This is really about a long-term investment in the future skills of New Zealand," he said.
Mr Robertson said no decision has been made about whether the extension of the policy to a second and third year of free fees would actually happen. The policy's implementation, he said, could be revised in the future.
"One of the things we are learning rapidly about the changing nature of work, education and training is that we do need to offer people life-long learning," he said.
"In many ways that's what this policy is about. You don't need to take it up as a degree course... so we will obviously when it comes to implementing the policy, look at the world we're living in.
"That's the right to do, but it is our policy, we are committed to it and that hasn't changed."
After a pre-Budget speech to the Wellington Chamber of Commerce yesterday, Mr Robertson admitted to reporters the government could have done better communicating who was eligible for a year's fees free.