Organised crime could be profiting from student loan fraud worth at least £60m at unregulated colleges in England because of lax oversight, according to a report by the National Audit Office.
The public spending watchdog said there has been “several instances of potential fraud and abuse” at private higher education providers, which offer courses leading to degrees awarded under franchise by mainstream universities as part of a commercial arrangement.
Some providers are said to enrol students with little or no interest in completing a course but who can apply for government-backed maintenance loans worth up to £13,000. The provider can gain £9,250 in tuition fee loans, part of which is then paid as franchising fee of up to £3,000 per student to the degree-awarding university.
students taking notes in a lecture – close-up of three students with pens and notepads, two young women, one wearing a black polo neck jumper and the other a dark grey hoodie, both with their hair in ponytails, with a young man in denim jacket, cream jumper and baseball cap between them, all looking intent and concentrating
In other cases, agents are offered lucrative commissions to sign up students. Examples of fraud detected by the Student Loans Company (SLC) – which administers the loan system for the government – included the involvement of organised crime, identity theft and false documentation.
The House of Commons’ public accounts committee this week announced it would hold an inquiry into the regulation of franchise providers.
Meg Hillier, the MP who chairs the committee, said in response to the NAO report: “Recent fraud has exposed significant gaps, including no clear responsibility for fraud enforcement across controls designed to protect students and taxpayers’ interests which have been exploited.
“The Department for Education must clarify and strengthen these controls and promote an anti-fraud culture across government.”
Robert Halfon, the higher education minister said: “Franchising can be a good way to support more people from disadvantaged backgrounds into higher education, however I recognise there is more to do to strengthen oversight.”
