Under legislation affecting UK residents, students from Northern Ireland were expected to pay up to £9000 a year to attend Scottish universities.
However, if these students take up their right to dual citizenship with the Irish Republic, they can apply as EU students and have their fees paid.
Crucially, the switch in status also has an impact on universities because they can recruit as many fee-paying students as they like – but numbers of publicly-funded students are tightly controlled.
If universities over-recruit publicly-funded students they face fines of up £1820 per student, administered by the Scottish Funding Council (SFC).
Alastair Sim, director of Universities Scotland, which represents university principals, said: "If and where students that seek to change their citizenship in their application mid-cycle are successful in doing so, the offer of a place made by the university effectively becomes part of the ring-fenced places – adding further pressure where demand is already very high.
"We don't have precise numbers as we're still dealing with offers rather than entrants, but this has the potential to push universities over their strict allocation of funded places in a way that universities could not have anticipated.
"In these unprecedented circumstances it would be very unfortunate if universities then incurred further financial penalties in addition to the loss of tuition fees they would already have to absorb in admitting a student with changed circumstances."
Earlier this month, evidence emerged of the likely impact of the loophole. Edinburgh University said some 30% of its 1160 applicants from Northern Ireland had declared joint Irish nationality – up from one- quarter the previous year – while Glasgow University said 25% of applicants from Northern Ireland identified themselves as Irish nationals – 286 out of 1140. Dundee University recorded a 20% increase, while Aberdeen University identified 16%.
It is difficult to estimate how much potential fines could cost universities because the applications process has not finished, with final figures on students who have switched their fee statuses currently unknown
Last month, it was suggested by the Scottish Conservatives that universities faced a multi-million-pound black hole in funding because of lost fees.
However, the figures were based on overall applicant numbers to Scottish universities from Northern Ireland and not the actual number of students accepted – which will be a fraction of those who applied.
A Scottish Government spokesman stressed that universities could refuse to admit students who switched their applications.
He added: "A university that recruits .... beyond the number of funded places could be subject to fines by the SFC to reflect the pressures this will have created on the student support budget.
"It is entirely at the discretion of that institution whether they would wish to continue processing the applicant if they have switched and, with that in mind, students must think carefully about trying to change the basis of their application, as it could see their offer being withdrawn."
A SFC spokesman said "mitigating circumstances" would be considered before any penalties were applied.