Revenue gained by extending the administration charge for student loans will be used to create more tertiary education places, Tertiary Education Minister Steven Joyce says.
It will gather an estimated $15 million a year.
Mr Joyce said today administration costs for the student loan scheme were more than $40 million a year and only $10m was recovered through the current $50 charge.
"We're not charging interest on those loans and the good news is that we get to recycle that money back into tertiary education -- that's what I'm really looking to do," Mr Joyce said.
"We're looking at some things around the margins that would reduce some costs to enable us to recycle that back into tertiary education."
Labour's tertiary education spokeswoman, Maryan Street, said the Government was giving with one hand and taking with the other.
She said one of the first tertiary education policies the Government implemented was a 10 percent voluntary repayment bonus - students making a voluntary repayment of $500 would get a $50 bonus.
"This completely wipes out any benefit from the Government's much-hyped legislation last year," Ms Street said.
"This increase in costs, coupled with a round of announcements about limitations on student loans, changes in entrance criteria and tertiary funding all make tertiary education increasingly for the few and not the many."
Green Party MP Gareth Hughes said the Government was "going round the back door" to get more money from students.
"It's a punitive attack on students which is frankly unnecessary," he said.
"This is going to be coming out of students' pockets because the Government can't put interest back on student loans."
