New students should pay interest on students loans, the Productivity Commission says after a review of the tertiary education sector.
But the government and Labour say it won't happen, while the Green Party has called that recommendation and others a "radical ideological experiment" on a whole generation of students.
The New Models of Tertiary Education report follows a year-long inquiry into the sector and also proposes abolishing University Entrance and improving careers education for young people.
As well as reintroducing interest to student loans, the reforms also included a proposal that the repayment threshold be raised.
Failing that the commission wants to see balances adjusted for inflation based on the consumer price index.
Labour leader Andrew Little said he didn't think much of the interest proposal at all.
"You've got a generation going through university now who face the very real prospect they'll never be able to own their own home so why would we add to the impediments they have already for going down that path by putting interest back on student loans," he said.
"It just doesn't make sense in this day and age and we won't be doing it."
Prime Minister Bill English said interest was off the agenda.
After "years of arguments" the student loan scheme was settled and "we don't want to change it", he said.
Suggestions universities be able to set their own entry requirements receive a warmer reception.
Mr English said essentially that was the case already, with universities able to make exceptions for people without UE, and impose additional conditions.
The 527-page final report, released on Tuesday, made 49 recommendations for reform including improving regulatory settings, reforming how the government purchases tertiary education and ensuring "system architecture" produced more innovative performances.
In its report, the commission says the present system doesn't cater adequately for diverse students or encourage new models to emerge to meet evolving needs and opportunities.
It says access is rationed in a way that excludes some people from participating at all.
"The system is characterised by a high degree of central control: over time, government has responded to fiscal pressure, political risks and quality concerns with increasingly prescriptive funding rules and regulatory requirements," it said.
"Stability has come before innovation and the interests of students."
The commission said its recommendations aimed to free up the system, so new models could meet the needs of a wider variety of students.
PRODUCTIVITY COMMISSION RECOMMENDATIONS
* Charge interest on new student loan repayments, and lift the repayment threshold
* As an alternative to interest, adjust balances for inflation based on CPI
* Abolishing University Entrance
* Better quality control and self-accreditation for strong performers
* Making it easier for students to transfer between courses
* Better careers education for young people
* Enabling tertiary institutions to own and control their assets
* Making it easier for new providers to enter the system
* Facilitating more and faster innovation by tertiary education providers.