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Wananga will now be able to apply to call themselves universities or polytechnics.
The change came as part of the Education (Tertiary Education and Other Matters) Amendment Bill, which had its third reading last night.
Education Minister Chris Hipkins says there will be a tough test for wananga to use either of the terms.
The Act gives the Tertiary Education Commission new powers to monitor the tertiary sector and to hold providers to account for their use of public funding.
It also recognises a new type of private training establishment, Community Tertiary Education Providers, which are not-for-profit community groups providing tertiary education for the public good.
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