The cost of subsidising international PhD students at domestic tuition rates rose by nearly a quarter to $69 million in the most recent year, prompting the Education Ministry to review the arrangement and the Government to cap the scheme's funding in Budget 2026.

Education Minister Penny Simmonds said the ministry was reviewing the policy, under which international PhD students pay the same tuition fees as domestic students — about $10,000 a year — with the government topping that up with a tuition 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 over the past two years. The figures back that up: the scheme cost $55 million in 2019, dropped to just over $43 million in 2022 during the Covid border closure, then rose to $56 million in 2024 before climbing to about $69 million last year (RNZ).

Budget 2026 capped next year's funding for the scheme at 2024's figure of $56 million. The Education Ministry said the cap would be a "soft cap" — meaning it would be used to calculate each university's funding allocation rather than serve as a benchmark or enrolment target. The Tertiary Education Commission's Supplementary Plan Guidance 2027, published in July, confirms the funding cap on international PhD students and states the Government is considering a new funding model for them (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 accounted for about 48 percent of all PhD enrolments in New Zealand before Covid. That share dropped to 43 percent in 2022, with 4,310 enrolments, before rebounding 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 funding structure works like this: tuition funding for domestic students comes from funding rates set by the Tertiary Education Commission, the fees students pay directly to providers, and partly from the Performance-Based Research Fund (PBRF), which rewards universities for research quality. International PhD students are treated as domestic for fee purposes under the 2005 policy, but sit outside the loan and allowance system. A Ministry of Education Cabinet paper notes that Budget 2023 increased tuition subsidy rates for degree-level and above by 4 percent for two years, which flowed through to the international PhD subsidy line as well.

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

The Covid period offers a useful baseline. During the border closure, the Government set up a border exception allowing 250 international PhD and postgraduate students to enter the country and continue their studies (Beehive, 2020). Enrolments and costs both fell during that window. 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.

What is driving the cost increase is the combination of volume and the per-student subsidy rate. The 4 percent tuition subsidy uplift from Budget 2023, applied for two years, raised the per-student government contribution at the same time as enrolment numbers were recovering. With foreign PhD students now approaching half of all PhD enrolments, the scheme's fiscal footprint 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 distributed across institutions, and whether universities absorb it, pass it on to international PhD students, or reduce intake, will depend on whatever model the review lands on. Quigley's cautious framing — 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 the sector. International PhD students contribute to research output, supervision income, and university rankings. Any change that raises the cost of studying in New Zealand relative to competitor countries risks affecting pipeline numbers. But the fiscal trajectory — costs rising more than 20 percent a year for two years — is one the Government was unlikely to leave unaddressed.