The oversight occurred at Walter Sisulu University in Eastern Cape province when a massive over allocation of funds was accidentally loaded onto the student's financial aid debit card.
The money, which was supposed to be a $100 stipend for food and books, was immediately available to the student, according to Intellimali, the company responsible for issuing the student cards. Four extra zeroes were added to the direct deposit.
University officials were alerted to the mistake by another WSU student who noticed the young woman's newly found spending habits.
Several local media outlets identified the student through social media, creating an uproar throughout WSU's student community. In compliance with South African law, university officials declined to release the student's personal details but have confirmed she is not responding to media inquiries and has made no official statement at this time.
Intellimali and WSU claim the student spent tens of thousands of dollars in just a few weeks and have begun examining her full transaction records to determine the extent of the spending spree.
The student's account has since been blocked and the remaining balance has been retracted, WSU spokeswoman Yonela Tukwayo said in a statement.
"The student will be liable for the money she has already spent," Tukwayo added.
Intellimali took full responsibility for the extraordinary oversight and claimed new policies already have been implemented to ensure such an incident never gets repeated.
The National Student Financial Aid Scheme, which provides a lump sum for universities to distribute to financial aid recipients, has demanded a full report from Intellimali and WSU.
"When a mistake occurs in these processes, it is in the hands of the university," NSFAS said a statement. "NSFAS is not involved, except to get an official report from the university detailing what happened."
Intellimali has "appointed a forensic auditor to investigate this incident which can only be described as unprecedented in our 10-year history," said the company's CEO Michael Ansell.
The formal investigation is underway and Intellimali claimed legal action will be taken against the student for the misappropriation of funds.
The gross oversight drew swift condemnation from the South African Parliament.
"This is unacceptable that such a grave mistake as this one could occur undetected on money appropriated by Parliament," said MP Connie September, who chairs the Committee on Higher Education and Training.