Students in Wales were wrongly handed £3.25 million in grants over the past decade.
The incorrect payments were made to students learning at home on distance learning courses. The funding was only supposed to go to those who physically attend a college. The money is given students who look after family members during their studies.
The Welsh Government will now write off the £3 million grants, blaming the error on "genuine misinterpretation" of financial support regulations for students.
The education secretary added that those students who started their studies before 2018 would continue to receive the grants. In a written statement, Kirsty Williams AM said "it is vital" to look at how ten years of incorrect payments were made and that "we learn lessons to make sure that this cannot happen again in the future".
Responding to the announcement, Welsh Conservative Suzy Davies AM welcomed the news students would not have to repay the grants given in error. But the shadow education secretary questioned how it took a decade for the Wales Audit office to realise the mistake. She said Wales "deserves better".