Six international students sponsored by the Department for International Development had their visas refused by the Home Office because the system does not work, a Labour MP has claimed in the Commons.
Adrian Bailey, moving a backbench motion on student visas, said the system must not deter bona fide students from coming to British universities.
And he told MPs: "Wolverhampton University had six international students refused visas even though they were sponsored by the Department for International Development.
"Even when that department wrote to the consulate, it was still rejected.
"If the Government can't get its own people into the country through the Home Office system, what hope do so many young people in other countries have of doing so?"
A series of select committees recommended students be omitted from net migration figures and the backbench motion urges the Home Office to bear this in mind in an overhaul of immigration policy.
Mr Bailey said cutting the number of international students coming from outside the EU by 87,000 to meet current targets would be "catastrophic" for the funding model of higher education.
"A policy which relies for its success on damaging a great export industry needs re-examination," the West Bromwich West MP said.
"This is an industry with a great brand, a huge demand for its product and incredible potential for boosting the economy both locally and nationally and it should be backed all the way.
"It is an industry that should be helped not handicapped and the current visa regime, whatever the legitimacy of the broad objectives of immigration policy, is not doing that.
"The answer is to change the policy and focus on real immigration issues which are, I recognise, of great concern to the public."
Tory MP Nadhim Zahawi (Stratford Upon Avon) said: "The message has to be one that we are open for business.
"Targets are not an end in themselves. They are a tool we use to measure the success of a broader policy aim - the Government's net migration target is about building an immigration system that works for Britain, one that delivers us economic benefits while addressing long standing public concerns.
"But if we are trying to meet those targets by discouraging a group that provide an obvious economic benefit, who are disproportionately less likely to settle here and who of all migrant groups attract least public concern, then something is wrong."