The university "Fees Free" scheme was reversed at last year’s Budget, which changed the eligibility from first-year students to students in their last year of study.
The changes came into effect in January this year, but the implementation was plagued with issues.
Otago University chief financial officer Brian Trott confirmed the university borrowed $36 million in February, with nearly half of this amount due to delays in receiving tuition fee payments from students.
"The shift in the government’s Fees Free subsidy — from covering the first year to covering the final year of study — caused significant confusion, particularly among first-year students," he said.
"Many were unaware they were now responsible for paying fees and had not initiated student loan applications, while others were still in the process of applying. The bulk of the tuition income has now been received."
The total amount borrowed was $36m.
Green MP Francisco Hernandez said the situation was a farce.
"This is the logical consequence of the ideologically driven slash and burn cuts the government has dealt the public sector.
"Expecting universities — who are already under pressure from proposed funding cuts — to front up with cash that they should have been able to rely on is absolutely unacceptable.
"We’re happy that the issue has been resolved — but Otago University staff shouldn’t be scrambling around to patch up the holes that the government’s cuts are leaving."
Universities Minister Dr Shane Reti said the end of first-year Fees Free changed the way payments for study support were delivered to tertiary education organisations.
"All organisations were advised of the change and how it would affect payments since May 2024.
"Universities are responsible for managing their own finances. It is up to them how they manage that change, so I am unable to comment on any measures Otago University might have taken."
Other universities were also aware of the situation.
A Victoria University of Wellington spokeswoman said it anticipated the delay in StudyLink payments earlier this year as changes to the Fees Free policy were implemented.
"As a result of our planning, no changes in short-term loans were required."
A University of Canterbury spokeswoman also said it did not have to borrow money as a result of the year one Fees Free funding being discontinued.
A University of Auckland spokesperson said it was committed to intervening to protect students’ interest and entitlements.
"Our interventions have mainly involved alerting the known affected students to the fact that any changes they make to their programme can impact their eligibility for Fees Free," they said.
"The TEC has established transitional regulations which create complexities for students who have used some, but not all, of their first-year Fees Free entitlement."
The Tertiary Education Commission said the government announced the end of first-year Fees Free in the Budget in May 2024.
"It was a matter of widespread media and public discussion before the announcement and has been since then," a TEC spokesperson said.
Tertiary education organisations had the primary responsibility for the relationship with students. They had contact with students who were thinking about enrolling with them and at enrolment time.
"This is the time where conversations about course fees and funding would take place."
TEC had been talking to universities about the changes to Fees Free since the announcement in May 2024.
The Fees Free website is the only way applications can be made for that funding. It was changed in September 2024 to advise potential students Fees Free was unavailable for first year in 2025 and pointed potential students to StudyLink as an option for those seeking financial support with course costs.
