Student associations say the two percent cap on tertiary fee increases for next year - the same as this year and last year - is too high. But Universities New Zealand says its not high enough.
The Union of Students' Associations president, Jonathan Gee, said the organisation opposed an increase in tuition fees - but would have accepted an increase of one percent as more reasonable.
Education Minister, Chris Hipkins, said the new limit struck a balance between the affordability of a tertiary education, and allowing providers to invest in resources.
Student debt is currently around $16billion, Mr Gee said, which is a major barrier to people pursuing higher education.
The Executive Director of Universities New Zealand, Chris Whelan, said the increase would not address the significant financial pressures facing the tertiary sector.
He said the cost of salaries, property, and information technology are all set to rise well above two percent in the next year, which will increase pressure even more.
Universities welcome any increase in funding, but will struggle to offset costs with such a small rise, he said.
The Government's fee-free policy covers first-year students, but will be extended to two years free in 2021, and three years in 2024.
Each year the Government sets a limit on tuition fee increases for domestic students.