Immigration New Zealand is investigating AUT University for enrolling an overstayer as an international student, accepting payment from her and letting her complete her studies while she was in the country illegally.
Chinese student Mengna Wang paid about $40,000 in fees over the two years she took to gain her bachelor of business in accounting.
But AUT has told her she cannot graduate because she did not have a student permit.
The acting head of Immigration NZ, Steven Dunstan, said it was an offence "to educate someone who does not have the authority to study".
"We have taken up with AUT the circumstances of Miss Wang's study there."
He said education providers were responsible for ensuring prospective students held authority to study before allowing them to do courses.
AUT's director of corporate affairs, Tiffany White, said it was the student's responsibility to obtain a student visa.
She said the university had a procedure to confirm students had the right visas, and it had been updated this year "to align with new, tougher provisions in the Immigration Act".
Miss Wang was able to complete her course at AUT without holding a visa to be in New Zealand.
Ms White said that because of the privacy law, universities could not make immigration status checks on students before offering them a place.
Immigration New Zealand said Miss Wang was not granted further student permits after her first one expired in December 2007 because it was not satisfied she was a genuine student.
Miss Wang came to Auckland in 2007 to study English at the New Zealand Academy of Studies, but was cut from the course because of her poor attendance.
Immigration said it had also found out that a medical certificate explaining her absence had been forged.
But even without a student permit, Miss Wang enrolled at ICL Business School and completed a diploma of business administration course.
Immigration said it will also be speaking to the school about Miss Wang's study there.
Using cross credits from her diploma, Miss Wang got her place in AUT in July, 2009.
Miss Wang said AUT knew all along she did not have a student permit.
"It's so unfair and crazy because I have studied hard and did what I have to do to pass the course," the 23-year-old said.
"I have worked hard for my bachelor of business, and I just want my degree so I can go back to China."
Her appeal to Associate Immigration Minister Kate Wilkinson to intervene last month was declined.
Miss Wang said an ex-boyfriend gave the fake medical certificates to the school without her knowledge.
But Ms Wilkinson said that even if she granted Miss Wang a student permit, she would still be unable to get her degree.
"AUT has advised that Miss Wang could not receive her parchment or official academic transcript unless she held a student visa that covered the whole length of study," the minister said in a letter to Miss Wang's immigration agent.
Immigration New Zealand says Miss Wang has been told she may be liable for deportation.
Uni in the gun for letting overstayer complete degree
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