The government has ruled out two of the Productivity Commission's most radical recommendations for the future of tertiary education, within hours of its announcement.
The commission's draft report on new models of tertiary education suggested charging interest on student loans and also floated the idea of giving 16-year-olds thousands of dollars to spend on tertiary education.
Tertiary Education Minister Steven Joyce said the government would not abolish the zero-interest policy.
"We won't be reintroducing interest on student loans and that's because we think the payment settings are about right.
"Students are making a contribution to their study and if they stay in New Zealand, they pay off the loans, they don't pay interest," he said.
Mr Joyce also poured cold water on the commission's suggestion for funding tertiary education by giving 16-year-olds a dedicated account to spend on courses.
"We also would be unlikely to consider the introduction of 'student education accounts', which look like it would involve changing one complex system for a new one with its own complexities," he said.
Mr Joyce said the report was a draft and the commission had more analysis to do before it was finalised.
"They've proposed some quite radical things and some quite incremental things. I think the incremental stuff is more likely to be adopted because we actually have a very effective system today and I don't see the need for huge radical change."
Suggestions are a 'nuclear' solution - Universities New Zealand
The draft report also called for the abolition of University Entrance, easier access to government subsidies by foreign tertiary institutions, and removal of the requirement that degrees be taught by researchers.
It said the government should stop its performance-linked funding system, which penalised institutions that did not meet performance targets for course and qualification completion. It said the penalties were too small and bad providers should simply lose their registration.
Universities New Zealand director Chris Whelan told Nine to Noon the tertiary funding system did need an overhaul, because it was developed 25 years ago based on the costs and pedagogy of the time.
But he said some of the commission's recommendations were too extreme.
"I actually give it high marks for identifying some of the problems, but very low marks for the solutions and for the evidence base sitting behind some of the proposed solutions," he said.
"This is a nuclear solution for something that needs a lot more finessing."
Mr Whelan said the government should remove its restrictions on fee increases so universities could offer students "new products".
Need to go further on funding?
The co-chair of the Quality Tertiary Institutions (QTI) group representing about 20 private institutions, Tommy Honey, said it agreed with the commission's assessment of problems in the sector.
"The key Productivity Commission recommendations are based on three arguments - that the system is overly constrained (and we believe it is), that this is due largely to funding issues (and again QTI agrees), and that removing the brakes on the funding system will result in a more dynamic system (which we also accept)."
Mr Honey said the commission should go further in some areas.
"We feel the report did not go far enough to address concerns regarding the vice-like settings on funding caps, set allocations and tight fee regulations."
Tertiary Education Union president Sandra Grey said the report contained useful analysis, but missed an opportunity to reject policies that created problems by encouraging competition and managerialism.
The commission was taking submissions on its draft report until 21 November and would provide the government with a final report by the end of February.
The Productivity Commission is an independent Crown entity, which provides advice to the government on improving productivity.