how does a level work

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Your qualification at level 7 or higher is acceptable if your course lasted 30 weeks or more.
English for Speakers of Other Languages (ESOL) qualifications are not acceptable.

References:

http://www.immigration.govt.nz/new-zealand-visas/apply-for-a-visa/tools-and-information/work-and-employment/acceptable-qualifications-for-a-post-study-work-visa
http://tophat.com/glossary/p/postsecondary-education/