The cost of helping international PhD students study in New Zealand at local fee rates jumped by nearly a quarter to $69 million in the most recent year. The Education Ministry is now reviewing the arrangement, and the Government has capped the scheme's funding in Budget 2026.

Education Minister Penny Simmonds said the ministry was reviewing the policy. Under it, international PhD students pay the same tuition fees as New Zealand students — about $10,000 a year. The government then adds a subsidy, starting at about $10,000 for the cheapest programmes. The policy has been in place since Budget 2005, when the Labour government lowered the cost of PhD study to domestic fee levels for new international students (Beehive, 2005).

Simmonds said the cost had grown by more than 20 percent a year for the past two years. The numbers tell the story: the scheme cost $55 million in 2019, dropped to just over $43 million in 2022 when Covid closed the borders, then rose to $56 million in 2024 before climbing to about $69 million last year (RNZ).

Budget 2026 capped next year's funding at the 2024 figure of $56 million. The Education Ministry said this would be a "soft cap" — used to work out how much each university gets, rather than setting a target for how many students they should enrol. The Tertiary Education Commission's Supplementary Plan Guidance 2027, published in July, confirms the cap and says the Government is considering a new funding model for international PhD students (TEC).

Universities New Zealand chair Neil Quigley said officials were talking to universities about the policy, but it was not yet clear what might change or when (RNZ).

Foreign PhD students made up about 48 percent of all PhD enrolments in New Zealand before Covid. That dropped to 43 percent in 2022, with 4,310 enrolments, before bouncing back to 5,265 enrolments — or 49 percent of PhD enrolments — last year. International PhD students are not eligible for government student loans or allowances (University World News, 2013).

The way the funding works is fairly simple in principle. For domestic students, the government pays part of the tuition cost through funding rates set by the Tertiary Education Commission. Students pay fees directly to their university, and a separate fund rewards universities for the quality of their research. International PhD students are treated as domestic for fee purposes under the 2005 policy, but they cannot access student loans or allowances. A Ministry of Education Cabinet paper notes that Budget 2023 increased tuition subsidy rates for degree-level study by 4 percent for two years, which also applied to the international PhD subsidy.

The Tertiary Education Commission's Budget 2026 announcement also records a 2 percent tuition subsidy increase for foundation education, effective 1 January 2027 (TEC). That is a separate funding line, but it signals the broader tertiary funding environment remains tight, with increases below inflation.

The Covid period offers a useful point of comparison. During the border closure, the Government allowed 250 international PhD and postgraduate students to enter the country and continue their studies (Beehive, 2020). Both enrolments and costs fell during that time. The rebound to 5,265 enrolments last year has pushed the scheme's cost well past its pre-Covid level, even though enrolment numbers have only just recovered.

Two things are driving the cost increase: more students, and a higher per-student subsidy. The 4 percent subsidy increase from Budget 2023 raised the government's contribution per student at the same time as enrolment numbers were recovering. With foreign PhD students now making up nearly half of all PhD enrolments, the scheme's cost has grown substantially.

The soft cap at $56 million against an actual cost of $69 million leaves a $13 million gap. How that gap is shared across universities — whether they absorb it, pass it on to international PhD students, or reduce intake — will depend on what the review decides. Quigley's careful wording, that talks are under way but nothing is decided, suggests universities are still working through their positions.

The broader context here is that the stakes are real for universities. International PhD students contribute to research output, supervision income, and university rankings. Any change that makes studying in New Zealand more expensive than in competitor countries could affect how many students choose to come here. But with costs rising more than 20 percent a year for two years, the Government was unlikely to leave the situation as it was.