The taxpayer is set to spend millions more dollars on university dropouts.
Figures obtained by Newshub shows the cost of those who fail to complete their first year of study will be nearly $40 million.
A free first year of tertiary study was Labour's flagship policy, aiming to make education accessible to everyone - but some are skeptical.
"You're going to get lots of tyre kickers just checking it out because they've got no skin in the game - they don't have to pay any money at all now," ACT leader David Seymour said.
Students aren't paying, but the taxpayer will. According to 2013 data, 14 percent of first year university students failed to complete their studies.
In its first year, the fees free policy will cost $275 million. If 14 percent of students drop out that means a potential $38 million could be spent on them.
The Government expects more people will enrol as a result of the policy - so in its second year, it will cost $372 million.
If dropout rates remain the same, that means a potential waste of $58 million.
"The government is giving money to rich kids and wasting it," Mr Seymour said.
The $38 million is on top of what taxpayers already cover in fees for those who drop out.
Before the fees free policy was adopted, the Government was already funding 71 percent of the $2 billion cost of tuition.
Education Minister Chris Hipkins wouldn't appear on camera, providing a written statement instead.
"The Government is extremely focused on providing taxpayers with value for money," it said. "The policy is an investment in the future."
Prime Minister Jacinda Ardern said there are no plans to add means testing to the policy.
"The whole point was making sure we extended the accessibility of our education system," she said.
First year students Newshub spoke to said free fees made the decision to study easier.
"Going into this year, I wasn't really 100 percent on what I was doing - so having it fees free means I've been able to give it a go," one person said.
"I was able to do more classes than I would have if it hadn't been free," another said.
The Government is introducing academic performance testing - so those who fail their courses won't get fees free.
However, that will only start once the fees-free education is extended beyond the first year of study in 2021.