The Government is committed to keeping interest-free student loans, Tertiary Education, Skills and Employment Minister Paul Goldsmith says.
The idea for reintroducing interest on student loans appeared in the Productivity Commission's report on new models of tertiary education, which included 49 recommendations.
Mr Goldsmith says the Government welcomes the report and will keep an open mind on all the recommendations, bar one.
"The Government is committed to retaining interest-free student loans for borrowers residing in New Zealand," he said.
"We do not want to see young people starting their working lives with unmanageable debt."
He said half the students who stayed in New Zealand after graduating repaid their loan in under six and a half years.
The report will be tabled in Parliament on Tuesday and the Government will make a formal response in due course.
However, both the New Zealand Union of Students' Associations and the Tertiary Education Union have attacked it.
NZUSA national president Jonathan Gee said the report was "a missed opportunity" to put students at the centre of the education system.
While some recommendations were promising, Mr Gee said the commission had failed to advance student interests in a meaningful way.
He said the commission went outside its terms of reference in pushing for interest on new student loans.
The NZUSA was also concerned about the recommendation to abolish University Entrance, saying students wanted the certainty of a target.
TEU national president Sandra Grey said the commission was advocating more of the market-driven approaches that it concluded had failed.
"The report clearly shows that the current Government's approach to tertiary education is not working, but then bizarrely recommends it does more of the same."