Some academics claim they have urged their university leaders to raise the English proficiency requirements but their concerns have been largely ignored because they are at odds with financial imperatives.
International education contributes $15 billion annually to the Australian economy. At some universities, international students account for more than 30 percent of revenue.
On Wednesday Fairfax Media exposed an online business called MyMaster, run out of Sydney's Chinatown, that had provided more than 900 assignments to students from almost every university in NSW, turning over at least $160,000 this year.
The website has since been taken down and Yingying Dou, the sole director of MyMaster, did not turn up to work on Wednesday.
Following the MyMaster revelations, scores of similar websites have come to light, revealing a burgeoning online black market.
More than 20 disgruntled academics contacted Fairfax Media on Wednesday expressing frustration at the widespread problem they say has been undermining the integrity of their institutions.
Dr McComas Taylor, the head of the Australian National University's South Asian Program, said universities were "very reluctant to do anything to upset this revenue stream".
"Just as governments have become addicted to gambling revenues from poker machines, universities have become addicted to revenue streams from international students," he said.
Dr Taylor said some international students who had met the language requirements were "functionally illiterate".
"If you let in a student who can't read, write or speak English at a sufficiently high level, it's a very natural consequence that they're going to end up cheating like this."
One professor from a business school at a NSW university said he had students whose English was so poor they routinely came to his office with an interpreter.
He said there was "unbelieveable pressure" to pass international students from university administrators who "don't want a cool flow of income being interrupted by real world problems".
"It's completely destroying our universities," he said. "It's buggering the thing for everyone."
Another experienced professor told Fairfax Media he retired some years ago "because of the practice and, in part, because the universities turned a blind eye to it".
While a spokesman for Education Minister Christopher Pyne said there would be "very severe consequences" for those caught cheating, the federal government encouraged more international students to study in Australia.
"We want to encourage it, not just because of the revenue international students bring to universities and our wider economy when they live and study in Australia, but also the networks established with other students and institutions that benefit our country throughout our region and the rest of the world," he said.
Andrew Norton, the higher education program director for the Grattan Institute, says international students are the "key profit making business" for Australian universities and they are increasingly supporting their overall operations.
International students often pay more than three times as much as locals for their degrees, up to $40,000 a year.
At the University of NSW international student fees contributed almost $350 million last year, about a third of the total $1.1 billion revenue. At Macquarie University, almost a quarter of total revenue came from international students.
The international reputation of Australia's universities was absolutely critical to the wellbeing of the entire education system, according to Labor's higher education spokesman, Senator Kim Carr.
"We simply can't afford to have matters of this seriousness arising in a manner which does profound damage, if unattended, to the entire education system," he said. "The allegations cannot be allowed to go unanswered."
Almost every university approached by Fairfax Media denied requests for interviews on Wednesday but insisted the problem was confined to a very small number of students and there were systems in place to catch offenders.
Only one - the University of Wollongong- asked Fairfax Media to provide the data that would help them investigate the offending students.
The deputy vice-chancellor of the University of Wollongong, Professor Eeva Leinonen, said she was "concerned and disappointed" to learn students had paid for essays and insisted the university would investigate.
However, academics who contacted Fairfax Media on the condition of anonymity, fearing professional consequences from their universities, rejected the official line from the affected universities that the cheating was limited to a select few.
"We have really, really systemic problems with dishonesty in our student body," one senior lecturer said, adding that pressures on academics to produce research papers meant few had the time or energy to pursue disciplinary action against cheating students.
"It works the whole way up the university chain," she said. "At every point you would encounter somebody who just wants it to go away."
Another lecturer told Fairfax Media some of his Chinese students who had limited English skills produced suspiciously exceptional essays but said he was left with "no choice but to give them a high-distinction because their essays are of such high standards".
Associate Professor Chris Ziguras, an international education researcher at RMIT University in Melbourne, said the problem of buying essays was common but not limited to international students.
"In subjects where students are submitting written work, it's a problem that's very widespread and that we're dealing with on a daily basis in academia," he said.