Immigration officials say Indian students have been regularly threatening self-harm and sleeping in cars because they did not earn enough to buy food.
Emails from Immigration NZ staff in India, obtained by the Labour Party under the Official Information Act, expressed concern about an "exploitation/facilitation triangle" in which Indian education agents, NZ educational institutions and Kiwi employers were all making money from Indian students.
The party has released the emails to justify its policy, announced this week, to remove automatic work rights from students doing courses below degree level.
Immigration NZ visa services manager Jock Gilray told the Herald cases of students threatening self-harm and sleeping in cars still "happen on occasion but is not believed to be widespread".
But he said the "exploitation/facilitation triangle" had been "significantly diminished" after the agency detected widespread fraud in student applications from India last year, leading to tighter auditing of education agents, NZ schools and employers.
"There are likely to be still some aspects of this issue remaining but the effect has been significantly diminished compared to previous years following the tighter Government regulations both offshore and onshore, plus greater transparency and public understanding of the matter," he said.
Christine Clark of Independent Tertiary Education NZ, which represents mostly sub-degree private training establishments (PTEs), accused Labour of "decimating" a $4.5 billion industry based on outdated information.
"If they go and remove all the low-level qualifications, they will decimate the industry," she said.
PTEs enrolled 42,500 of the country's 132,000 international students last year, many in courses such as business and hospitality which have been popular with students attracted by an automatic right to a one-year work visa after completing a qualification involving at least 60 weeks (normally two years) of study.
India provided 44 per cent of PTE international students last year, although the Indian numbers were down 11 per cent from the year before because of the crackdown on fraud and a new English language requirement introduced in October 2015.
Immigration NZ's Mumbai risk manager Justin Alves wrote in an email on June 22 last year that "massive" commissions charged by Indian agents were driving a "low-quality/high-volume" approach to the Indian market.
He pointed to an "agent/school/high-risk NZ employer exploitation/facilitation triangle which has built up around this whole market, resulting from the fact that most [or almost all?] Indian students intend to settle in NZ".
Student visas require students to have $15,000 a year for living costs in addition to their fees. Mumbai operations manager Dan Smidt wrote on August 2 that the ANZ Bank was reviewing its Funds Transfer Scheme which allows Indian students to transfer $15,000 to an ANZ account and withdraw only $1250 a month to ensure that they don't run out of money.
"[ANZ] have indicated that they regularly receive calls from Indian students threatening self-harm, stating that they are sleeping in cars, are hungry and have no access to food, and therefore need funds released urgently," he wrote.
Raj Singh, a community worker at the Gurudwara Nanaksar Sikh temple in Manurewa, told the Herald that many Indian students sought food and other help from the temple when they ran out of money.
"Last year we used to have a lot of students living in cars," he said.
"A lot of them who are in these shoddy courses cannot get jobs here in Auckland. They end up working on farms and they go and stay in Tauranga or Te Puke and come here two days a week and sleep in their cars."
At first the temple let them sleep inside the temple, but Singh said that stopped after "some issues" with the students, and they now only ate at the temple.
"I would say the situation won't have changed that much," he said.
However, immigration lawyer Alastair McClymont said student numbers were dropping dramatically because of tighter checks by both Immigration NZ and the NZ Qualifications Authority, which has deregistered four PTEs in the past year and negotiated course closures or transfers at two others.
"You'll easily get a 10,000 to 20,000 reduction in total migration numbers by the end of the year," he predicted.
Gilray said Immigration NZ declined 39 Indian student visa applications for fraud in the first five months of this year, down from 353 declined in the same period last year.
The approval rate for student applications from India improved from 49 per cent in the first five months of last year to 67 per cent this year.
Labour immigration spokesman Iain Lees-Galloway said PTEs had nothing to fear if they were providing "genuine education" rather than courses that were purely a route to residency.
An ANZ Bank spokesman said the Funds Transfer Scheme was still being reviewed.