Education Minister Chris Hipkins has revealed more than 470 false declarations have been made on fees-free applications since the policy came into practice in 2018.
Hipkins made the revelation in response to written questions by the Opposition's associate spokesperson for tertiary education, National MP Simeon Brown.
Hipkins said he's been advised by officials at the Tertiary Education Commission that charges have been laid against three individuals who made false declarations in the 2019 academic year.
He also revealed the Government has spent $23,000 on three students who were ineligible for fees-free in 2019 who made false declarations, and $3000 on another student in 2018.
In both cases the minister said the Tertiary Education Commission chose to exercise its discretion not to recover the fees. No details were provided about how the students falsified their applications.
Simeon Brown, MP for Pakuranga, said the Government is "sending a message" that students can get away with making false declarations without facing consequences.
"Ineligible students who have had their tertiary fees covered should either pay back the money or have it transferred on to their student loan. It isn't fair that they've merely had a telling off, if that.
"We know almost 500 people have been caught, but how many more have got away with lying on their application, and how much more taxpayer money has been paid out when it shouldn't have?
"If Chris Hipkins is serious about helping tertiary students he should be looking into this as a matter of urgency and putting a stop to people abusing the system, rather than letting them get away with it penalty-free."
Finance Minister Grant Robertson announced in May 2019 that funding for the Government's one-year fees-free policy will be reallocated due to it not meeting initial forecasts.
He said the funding, some $197 million, would be "redirected" to the Government's vocational education reform of merging all 16 of the country's polytechnics into the New Zealand Institute of Skills & Technology.
The legislation behind that, the Education (Vocational Education and Training Reform) Amendment Bill, passed its final reading in Parliament last month, 63 votes to 57.
The National Party announced a proposal to reverse the Government's polytechnics merger if elected in 2020 and teased options to replace the 'fees-free' policy, in its education discussion document released in November.
The options it proposed for replacing the fees-free policy include writing off student loans, implementing additional payments for living costs, and changing repayment rates.
A Treasury document from early 2018 showed the Government was warned the biggest risk to its fees-free policy was an enrolment spike - but that's the opposite of what happened.
The vice-chancellor of Auckland University of Technology (AUT) defended the policy in 2018, saying it's helped students get started.