Funding mechanism

The Minister responsible for tertiary education issues the DQ3-7 funding mechanism. It sets out the purpose of the fund and gives authority to the Tertiary Education Commission (TEC) to administer the funding.

Funding is agreed through a tertiary education organisation’s (TEO's) Investment Plan (ie, it is on-Plan funding). For more information see Plan Guidance and Toolkit. A TEO that receives DQ3-7 funding is required to:

• comply with the requirements of the Education and Training Act 2020, and
• comply with the funding conditions for the relevant year specified in its funding approval documentation.

The overall amount of DQ3-7 funding available is set through the Government’s annual budget process. We determine the appropriate amount of DQ3-7 funding for a TEO through the annual investment process and through additional funding if available.

Annual Maximum Fee Movement (AMFM)

The AMFM policy sets limits on fees that tertiary education organisations (TEOs) can charge learners. Its purpose is to promote affordability of study for learners while allowing TEOs some flexibility in setting fees. 

The 2024 AMFM is set at 2.8% – unless TEC approves an exception. The AMFM for 2023 was 2.75%. The AMFM rate for each year is published in the funding mechanisms.

Funding mechanisms and delegations

The AMFM policy applies to Delivery at Levels 3–7 (non-degree) on the New Zealand Qualifications and Credentials Framework (NZQCF) (DQ3-7) funding. It applies to fees that:

• all domestic students are required to pay, and
• have been funded in a previous year (or years).

The AMFM also applies to:

• courses established by a TEO that are a substitute for an existing course on the same or similar subject matter, at the same or a similar level on the NZQCF, and
• micro-credentials approved by the New Zealand Qualifications Authority (NZQA) to be part of a programme leading to a qualification.

For more information about when a new course is considered a substitute course and the AMFM applies, see 

For more information about micro-credential fees, see Micro-credentials funding and fees.

The AMFM does not apply to fees charged for courses delivered in work-based learning modes funded through DQ3-7.

Note: Fee increases can only be applied annually. Courses where the AMFM was not applied in previous years are not eligible to “catch up” fees in the following year.

Additional changes from 2024

Changes have been made to how the AMFM is regulated to allow providers flexibility to set lower fees temporarily.

For 2023 and previous years, if you temporarily lowered your fees for a period that extended across calendar years, AMFM rules prevented you from increasing the fee back to previous rates.

From 2024, if you reduce fees for a course across one or more calendar years, you can return to the maximum fee you charged before the reduction, as well as applying the AMFM rate increases for the period in which the fee was reduced. This new rule will take practical effect from 2025 as it requires a discounted year to apply it to.

Note: This only applies from 2024 and does not apply to fee reductions that were in place before 2024.

Exceptions to the AMFM

Applications for exceptions are considered annually, in the year before the course will be delivered. 

2024 AMFM exceptions

You may apply for an AMFM exception to increase your fees by up to an additional 2.8% above the permitted AMFM. 

We may only grant an exception to the AMFM policy under exceptional circumstances. The exception criteria are published in the funding mechanisms.

Funding mechanisms and delegations

We will only grant an exception if the following criteria are met:

• the TEO can demonstrate that it is financially unsustainable to deliver the course, in terms of the cost of delivering the course and taking into account the total income the course would generate (including government funding and tuition fees), and that there are no satisfactory alternatives to limit costs;
• the existing fees for the course are no more than the 75th percentile of the range of fees charged for similar courses;
• and any two of the following three criteria:
  • where the course is part of a programme at Levels 3–7 on the NZQCF that has been delivered previously, the programme has a cohort-based completion rate that meets or exceeds the median performance benchmark for that NZQCF level in the previous year;
  • the TEO can demonstrate that the course is in some way unique or special; for example, that there are no available local alternatives; and
  • not allowing an exception will prevent the TEO from making a significant contribution to the achievement of one or more of the Government’s priorities, as set out in the current Tertiary Education Strategy.

Note: There is a limit to the number of courses for which a TEO can request an exception each year. For details on this, see the Applications Guidelines for Exception under the AMFM policy below.

How to apply for an exception to the AMFM

The application process for 2024 is now open. Applications must be submitted by 5.00pm on 30 November 2023.

Please read the exceptions information in the Application Guidelines for Exception under the AMFM Policy below.

AMFM exception applications for any course that starts between 1 January 2024 and 31 December 2024 must be received by email before 5.00pm Tuesday 30 November 2023.

Submissions from student bodies should be received no later than one week after we receive the TEO application.

Submit applications and all supporting information to our Customer Contact Group at customerservice@tec.govt.nz.

Applications must be made using the following forms and templates:

• Application for Exception under the AMFM Policy – Application template (DOCX 261 KB)
• Application Guidelines for Exception under the AMFM Policy (PDF 460 KB)
• Application for Exception under the AMFM Policy – Financial data template (XLSX 42 KB)
• Application for Exception under the AMFM Policy – Chartered accountant attestation form for PTEs (DOCX 257 KB)
• Application for Exception under the AMFM Policy – Chartered accountant attestation form for TEIs (DOCX 255 KB)

Setting fees and course costs for new courses

Exceptions to fee limits for new courses

Fees for a new course funded through DQ3-7 must be no more than the 75th percentile of the range of fees charged for similar courses.

When identifying similar courses we consider the course:

• funding category,
• classification under the New Zealand Standard Classification of Education (NZSCED), and
• equivalent full-time students (EFTS) factor.

In exceptional circumstances you may apply for an exception to the limit on new course fees. The exception criteria are published in the funding mechanisms.

Funding mechanisms and delegations

In determining exceptions, we consider the following criteria:

• The course would not be financially viable without a higher fee.
• Where the course is part of a qualification at Levels 3-7 on the NZQCF that has been delivered previously, the programme has a cohort-based completion rate that meets or exceeds the median performance benchmark for that NZQCF level in the previous year.
• You can demonstrate that the course is in some way unique or special, for example, there are no or very few similar courses to compare fees with.
• The course is aligned to Government priorities as set out in the Tertiary Education Strategy.

How to apply

Information about how to apply is set out in the application guidelines provided below. Read these carefully before completing an application.

Exception to fee limits for new course fees – Application guidelines and application assessment information (PDF 621 KB)

Exception to fee limits for new course fees – Application  template (DOCX 259 KB)

Exception to fee limits for new course fees – Financial data template (XLSX 94 KB)

Email your application to our Customer Contact Group at customerservice@tec.govt.nz, with the subject line [EDUMIS] – Exception to fee limits for new course fees application.

The deadlines to submit an application are:

• 5.00pm on the last Friday of November
• 5.00pm on the first Friday of February
• 5.00pm on the first Friday of June
• 5.00pm on the first Friday of August.

Any submissions from student bodies need to be received within seven days of those dates – no later than 5.00pm the Friday after you submit your application.

We will advise you in writing of the outcome of your application.

Questions

If you have any questions about the application process, please contact email our customerservice@tec.govt.nz or your Relationship Manager. We encourage you to ask any questions early.

Funding allocation and payments

Funding allocations, including any amendments, are available through the My Allocations and Payments app on Ngā Kete.

DQ3-7 funding is paid in equal monthly instalments.

For the calculation of indicative allocations see the methodology from the relevant year. The most recent information is at the top.

For more details regarding your specific allocation, please contact customerservice@tec.govt.nz or your Relationship Manager.

Funding calculation

We calculate a TEO’s value of delivery using:

• the number of valid domestic learner enrolments, measured by equivalent full-time learners (EFTLs), and
• the programmes, qualifications, and any component courses, in which a valid domestic learner is enrolled or for learners eligible under the Non Domestic Learners Exemption Process (NDLEP).

To calculate a TEO’s consumed DQ3-7 funding, we use the following elements:

• the metric (EFTLs value)
• course classification
• funding category
• funding rates
• for ITR programmes, the Unified Funding System (UFS) funding rate applicable to that programme
• learner enrolments.

For details on funding refer to the DQ3-7 funding conditions for the relevant year.

Re-enrolling DQ3-7 provider-based learners reported through SDR

Where a DQ3-7 learner requires further study to complete their qualification, their study can only be to complete courses that they have not yet passed. This can include content not yet studied or content studied and assessed but requiring a re-sit.

For example:

A TEO enrols a learner in all courses linked to a 60-credit (0.5 EFTL) qualification. The sum of the course EFTL factors is 0.5 EFTL.

The learner passes/achieves 30 credits from the 60-credit course enrolments. The TEO is funded 0.5 EFTL, for the 60 credits of courses the learner was enrolled in.

The TEO re-enrols the learner in a second period of study for the remaining 30 credits not yet achieved. The TEO is funded 0.25 EFTL for the 30 credits of courses the learner was re-enrolled in.

The learner successfully completes the courses and is awarded the qualification.

The learner will have received 0.75 EFTL worth of provision (90 credits), and the TEO will be funded for 0.75 EFTL delivery (0.5 + 0.25 EFTL) (assuming funding conditions are met for each course enrolment). Note: The TEO will report 0.25 EFTL (30 credits) unsuccessful course completions, and 0.5 EFTL (60 credits) successful course completions.

Calculating EFTL remaining vs consumed

To determine the exact value of the EFTL remaining for a returning learner, use the following formula:

For conditions on exceeding the total annual EFTL value of the qualification, see the DQ3-7 funding conditions for the relevant year.

Funding rates

This section provides information on DQ3-7 funding rates. For detailed information on the Delivery Classification Guide and how it is used for funding see Delivery Classification Guide.

Modes of delivery

Under DQ3-7 funding, there are five modes of delivery that reflect how learning takes place.

An individual learner’s programme can be made up of one or more modes. This will enable learners and employers to access learning opportunities in a way that works best for them and supports them to move seamlessly between different ways of learning.

The modes recognise the different cost structures involved in delivery.

The modes of delivery have been designed as part of the UFS delivery component to:

• recognise broad differences in costs across modes and subject areas; they will be used to determine the funding rate for providers
• support the quality, relevance and growth of work-based learning
• meet learner, employer and community needs
• be simple and transparent.

For more information, see Modes of delivery – Unified Funding System.

Flexible funding

We fund eligible TEOs for eligible DQ3-7 provision above the amount the TEO has been approved to deliver. This is to provide TEOs with flexibility to meet additional learner demand.

Flexible funding:

• is payable for provision towards:
  • qualifications that we have agreed to fund in your Mix of Provision (MoP) (for private training establishments), or
  • the mode and UFS subject category rate volumes of provision that we have agreed to fund in your MoP (for tertiary education institutions)
• does not mean we have changed your approved funding allocation, and
• is subject to the conditions that we have imposed on your funding.

The external evaluation and review (EER) category referred to in the funding conditions will be the highest published EER category for the TEO during the funding year to which flexible funding is being applied.

Flexible funding is calculated using the December Single Data Return (SDR) and the Industry Training Register (ITR) 31 March cut-off. Payment is made in April of the following year for SDR only submitters, and in May for ITR only and ITR + SDR submitters.

For the purposes of calculating flexible funding, the value of 10 EFTL of delivery is calculated using the average EFTL rate of a TEO’s total actual delivery (funded and unfunded), as determined by us.

The table below shows examples of how flexible funding is calculated (assuming a generic funding rate of $10,000 per EFTL to illustrate).

For further information see the DQ3-7 funding conditions for the relevant year.

Funding wash-ups

For the calculation of funding wash-ups, see the methodology and technical specifications from the relevant year. The most recent information is at the top.

Suspending or revoking DQ3-7 funding

Under clause 16 of Schedule 18 of the Education and Training Act 2020 (the Act), we may suspend or revoke some or all funding given under section 425 of the Act if we are satisfied on reasonable grounds that:

• when measured against performance indicators, the TEO has not achieved, or is not achieving, an outcome anticipated in its Investment Plan for a tertiary education programme or activity in relation to which funding has been given under section 425 of the Act,
• the TEO has not complied, or is not complying, with a condition on which funding has been given under section 425 of the Act, or
• the TEO has not provided, or is not providing, adequate and timely information required by the TEC or Ministry of Education under section 425 of the Act.

If a TEO has its funding approval revoked in accordance with clause 16 of Schedule 18 of the Act, the unspent portion of funding is repayable to the TEC (for conditions see the DQ3-7 funding conditions for the relevant year). We may arrange to offset the amount against any funding payable to the TEO.

Subcontracting

Subcontracting is a situation in which a TEO uses TEC funding to pay another organisation to deliver teaching or assessment on its behalf. This excludes:

• teaching and learning activities contracted to individuals or employers (eg, an employee on a fixed-term contract, an honorary staff member, or a contract for teaching and learning services with a subject-matter expert for part of the programme such as for first aid provision)
• research activities or postgraduate research supervision, and
• learning that occurs within vocational placements such a workplace placement or practicum.

A TEO must not subcontract any DQ3-7 funded activities without our prior written consent.

For conditions on subcontracting see the DQ3-7 funding conditions for the relevant year.

Subcontracting can be agreed in two ways

Subcontracting can be agreed to within a TEO’s Investment Plan (the Plan). The subcontracting specified in the Plan is permitted for the period of the Plan. If the Plan expires then you need to obtain approval from us again.

Subcontracting can also be agreed outside of a Plan by seeking our approval in writing. Again, the subcontracting specified is permitted for the period agreed with us.

At any time, TEOs can contact us to discuss proposed subcontracting.

Subcontracting TEO obligations

A TEO that has received approval from TEC to subcontract delivery to another party:

• must comply with any conditions imposed by us within a consent to subcontract; and
• must ensure that the subcontracted party does not further subcontract any functions; and
• will be accountable to us for the use of the DQ3-7 funding, including in respect to legislative and funding condition requirements.

For more information see the DQ3-7 funding conditions for the relevant year.

Student Loan Scheme payments

Work-based learning is not eligible for StudyLink loans and allowances.

We are responsible for approving each qualification for access to Student Allowance and Student Loan Schemes. StudyLink assesses the eligibility of individual learners.

A qualification must be approved for DQ3-7 funding before a learner can access Student Allowance and Student Loan Schemes for that qualification. For further information on eligibility see StudyLink.

Note: We will not backdate approval for access to Student Allowance and Student Loan Schemes. Therefore, if applying for funding for a new qualification, you must provide all necessary information to TEC at least four weeks before the start of tuition for the qualification. This will ensure that each learner who is enrolled in an approved course or programme can access financial support if eligible.

Requesting tuition fees payment from StudyLink

If the learner has arranged to pay their fees through the Student Loan Scheme, you should:

• get the learner’s agreement to authorise the payment from their loan account
• send a Verification of Study to the Ministry of Social Development (StudyLink)
• receive confirmation that StudyLink has accepted the student’s loan application, and
• inform the learner in writing of arrangements concerning payment.

When requesting tuition fees from StudyLink ensure that the fees payment requested is for the:

• learner
• reported programme(s), and
• study period(s) listed in the Verification of Study (VoS) response.

Recognition of prior learning

Tuition fees requested from StudyLink, and EFTL the learner is enrolled in, must reflect the course of study that the learner is required to pay for and study after both recognition of prior learning (RPL) and previously awarded credits (CRT) have been recognised and removed from the learner’s programme of study or training (ie, not the tuition fee and EFTL for the whole programme).

Note: Payment of full tuition fees may not be requested from StudyLink and subsequently refunded to the learner after RPL.

Qualifications delivered full-time

We will only approve a DQ3-7 funded qualification for learner access to Student Allowance and Student Loan Schemes if it:

• is quality assured by the New Zealand Qualifications Authority (NZQA) or the Committee on University Academic Programmes (CUAP)
• is delivered full-time
• runs for a minimum of 12 weeks, and
• has an EFTL value of at least 0.3.

Qualifications delivered part-time

A programme for a qualification of less than 0.3 EFTL is classified as part-time regardless of the number of weeks over which it is delivered. A part-time programme for a qualification is not eligible for learner access to student allowances.

For a DQ3-7 funded part-time programme leading to award of a qualification, we will only approve learner access to the Student Allowance and Student Loan Schemes if the programme meets one of the following criteria:

• it runs for 32 weeks or more and has an EFTL value of at least 0.3 EFTL, or
• it runs for fewer than 32 weeks with an EFTL value of between 0.25 and 0.3 EFTL.

Micro-credentials

Micro-credentials are not eligible for Student Allowance and Student Loan Schemes access.

Loan entry threshold (LET)

The loan entry threshold (LET) is used to identify the minimum EFTL value required for a learner’s individual study programme to be deemed full-time. This affects learner eligibility for Student Allowance and Student Loan Schemes. A qualification that is not deemed to be full-time (ie, not approved for access to Student Allowance and Student Loan Schemes) can nevertheless be funded through DQ3-7.

The LET is determined by matching a range of gross weeks to a range of EFTL values. A gross week is the total length of enrolment in a programme of study, including holiday weeks (recess).

The table below shows this relationship. Qualifications of less than 0.3 EFTL may still be eligible for learner access to the Student Allowance and Student Loan Schemes.

Student Allowances – paid practical work

Learners who undertake paid practical work as part of their course of study are not entitled to any Student Allowance payments for the week(s) they undertake that work. It is important that you discuss this with your learners.

For more information on allowance entitlements and paid practical work see StudyLink.

For details on learners with unpaid fees see the funding conditions for the relevant year.