AUCKLAND, July 30 - Party leader Peter Dunne announced the plan on Sunday, but said, while students would not pay fees, they would also no longer receive government living allowances.

Instead, they could choose to take out loans to support their day-to-day living expenses. 

"This would mean that the average student engaged in tertiary education will leave with the only debt against their name the living costs that they choose to borrow," Dunne said.

United Future argued its policy would help students avoid crippling debts and encourage more people to study and gain qualifications.

Increasing the amount of skilled graduates promoted greater innovation in New Zealand and addressed an "illusion" that tuition fees currently "cover all or most of the costs of study", it said.

"In fact, the taxpayer already covers the majority of tuition costs," it said.

The party said the amount students could borrow for their living costs would be set against measures, such as city rental prices, and a greater focus would be placed on enforcing loan repayments.