Nearly one in five students at universities, wananga and polytechnics fail more than half their courses each year.
New figures show that nearly 70,000 students in 2008 - or about 18% of the students in public tertiary institutions - failed more than half their courses that year.
The Government is removing access to student loans and allowances for students who fail more than half their courses.
The figures, issued by Tertiary Education Minister Steven Joyce, show how many students are at risk of breaking the new rule, though
Mr Joyce says the number affected will be lower than the raw figure he provided.
Radio New Zealand's education correspondent says that that's because not all students take loans or allowances and those who do will be assessed only after they have completed more than 1.5 years of full-time study.
Two-thirds of the failing students were part-time students and most of them were at polytechnics.
Students' union thinks figure overstated
The Union of Students Associations says the one-in-five figure is overstated.
Co-president Pene Delaney says it's likely many of those students did not actually fail their courses. "You might be seeing students who have enrolled in papers but subsequently pulled out of the papers for various different reasons," Mr Delaney says.
Looking at it the other way, he says, it's positive that so many are passing most of their courses.
The Government is introducing new measures to encourage both students and tertiary institutions to improve pass rates.