Schools for international students will face tougher English language tests in response to widespread cheating.
The New Zealand Qualifications Authority is examining several options, including forcing schools to use an independently supervised international exam instead of their own internal tests.
Deputy chief executive Tim Fowler said in the last year he had noticed an increase in multiple problems at some schools, including poor English levels and pass marks given for substandard work.
This had prompted NZQA to review its English language requirements to stop schools from taking students who were not up to scratch.
Mr Fowler said the exact changes had not been decided but once they were approved, all schools would be on notice.
"Under those new rules, any institution would have to meet them. If they don't they're in trouble."
He said 26 private training establishments were now under investigation for a range of suspected problems, such as poor academic performance, student complaints and fee payments missing from trust accounts.
NZQA had shown it would act on proven cases of misconduct, by closing 16 schools in the last two years, including eight in the year to date.
"They've either got to toe the line and deliver the quality of education that others are delivering or we work them out of the system."
The new policy marks a change in attitude by NZQA. A year ago when the Weekend Herald asked if many international students were enrolling despite very poor English, Mr Fowler said the fact those students passed indicated they understood the work.
Heads of several schools for international students have also criticised NZQA in the past year for reacting too slowly to what they say is a culture of fraud and dishonesty in the sector.
Languages International chief executive Darren Conway said independent English testing was a good idea which NZQA should have done long ago.
"It solves one of the problems because if you've got somebody coming in at the right level of English, they're more likely to be able to cope with the course and less likely to have to cheat to pass it. There's also less incentive for students to go and do loss-leading English courses at dodgy schools."
He believed NZQA was still overly fixated on student free protection, rather than the integrity of the whole system.
"We've been telling them this stuff for years and suddenly they're acting like it's new and unknown.
"One of the main ways of getting at the whole problem is moderation (ensuring marks are consistent and reliable) and checking exam results but they never had thorough systems in NZQA for doing that.
"It stuns me that we run a national qualifications system where results from one institution to another are not properly moderated."
The discovery that fake business diplomas were being sold at two schools in 2009 prompted NZQA to order a consultant's report, which warned last year that the agency had to change its "high trust" model in dealing with the new wave of mainly foreign-owned schools.
"There is a marked contrast between the interests of ITPs (institutes of technology and polytechnics) and their students and, for example, some new PTEs focused on the foreign education market," said the report by Rutherford Sloan.
"The prime interests of some students may not necessarily fully relate to the qualification but also to the quantum of points available for a residency application."
The report suggested stronger powers, some of which have since been introduced, such as giving NZQA the legal right to make unannounced checks and demand enrolment and academic records.
It also suggested the agency could contract specialist investigators to prepare more serious cases and hand these over to the police, once completed.
Two other ideas were rejected. One was for much tighter access controls to the national qualifications database and the other was a bond payment in case schools collapsed.
Mr Fowler said the first was overly complex when all but a handful of institutions were scrupulously honest in reporting results. The second would be hugely expensive for many PTEs and would not cover the costs of a collapse anyway.
Roll of dishonour
* In 2009 a Queen St school, the New Zealand Academy of Studies, was forced to close after it was caught selling a business diploma for $12,000.
* More than 150 international students gained fraudulent qualifications in less than a year from the API Institute of Education, which closed last year. Almost half paid for qualifications but never attended classes.
* Last year Massey University's Albany campus ousted about 50 students who enrolled in its business degree with fake diplomas from five local schools.
* Kingsland Institute, which used to have about 400 international students, now has only one, according to NZQA records, after two senior staff were charged with immigration fraud last year.
* A further 26 private training establishments are under NZQA investigation.