The fees-free study scheme is vulnerable to students rorting the system due to a gap in the government's records, Treasury officials warn.
The first year of education free policy was a key campaign promise from Jacinda Ardern's Labour Party. Photo: RNZ / Craig McCulloch
Labour's flagship policy offers a free year of education or training - up to the value of $12,000 - to first-time tertiary students, regardless of age.
A Treasury report obtained by RNZ under the Official Information Act warned a "key risk" was "misbehaviour" by providers or students.
For example, students might try to enrol for the free year despite having previously studied and therefore being ineligible.
The report said the government held no records of study from before 2003 in order to verify eligibility, meaning it would have to rely on students' declarations.
National's tertiary education spokesperson Paul Goldsmith said the scheme was ill thought through.
"Effectively what we've got is $2.8 billion worth of spending running on an honesty-box system."
National Party tertiary education spokesperson Paul Goldsmith Photo: RNZ / John Gerritsen
Mr Goldsmith said taxpayers' money would end up being spent not only on people who didn't need it but also "many who shouldn't get it".
"Think of somebody who might have done a couple years of study in the 1980s, there's no record that survived of that.
"There's no record, there's no data. It'll just rely on them saying, 'yes, this is my first year of study'."
However, Education Minister Chris Hipkins said the system was being "rigorously checked".
"Most of the things governments do rely on is the honesty of citizens, and we have rigorous checks in place to pick up when they're not being honest."
Education Minister Chris Hipkins Photo: RNZ / Richard Tindiller
Non-school leavers would have to sign a statutory declaration saying they met the requirements, roughly two thirds of all applicants.
Mr Hipkins said anyone who lied would be committing fraud and could face up to three years in prison.
"People take on an enormous risk right from the outset if they try to rip off the system.
"We've got pretty good data from 2003 onwards and we do have data from before 2003 - but it's not quite as complete."
He said the declarations would be frequently audited and he was "pretty confident" the system in place would catch those who attempted to break the law.
"We've actually got quite a lot of information that we can use to complete those audits, so anyone who fills in that form is taking a heck of a gamble".
Treasury report noted the Tertiary Education Commission (TEC) had audit functions which would help mitigate the risk of abuse by providers.
TEC chief executive Tim Fowler said every single statutory declaration was "individually reviewed and assessed".
The Commission asked applicants a variety of questions about their history and had already weeded out people who were ineligible, he said.
"One of the more common ones ... is people who've previously studied overseas."
He admitted the onus was on the student to be honest, as TEC did not have access to study records from before 2003 or overseas.
"I don't think there's any system that is going to be 100 percent invulnerable to people wanting to rort it," he said.
"What we've sought to do is develop a system that works [and] manages that risk appropriately."
Mr Fowler said he was particularly confident TEC could safely manage the process.
He said TEC had "comprehensive reporting and monitoring systems" and would carry out at least 120 audits of tertiary institutions this year - up from 70.
"Early signs are that this is a system that works."
Who is eligible for free education this year?
Broadly, Kiwis who finished school in 2017 - or will finish during 2018 - qualify for one year tertiary education or two years of industry training.
New Zealanders who have done less than half a year of education or training, here or abroad, also qualify for the scheme.