This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
Universities and other higher education providers are free to conduct commercial activities alongside teaching and research, and may create partnerships, also known as franchises, with other institutions to provide courses on their behalf. In the 2022/23 academic year, the Student Loans Company (SLC) paid £1.2 billion in loans for students to study at franchised providers. However, a lack of government oversight over these providers exposes the student finance system to exploitation from systemic and organised fraud and abuse. In 2022/23, detected fraud involving franchised providers totalled £2.2 million, 53% of the £4.1 million fraud identified by SLC.
Higher education providers (lead providers) are responsible for teaching quality and student experience at their franchisees. However, the Department for Education (DfE) has insufficient assurance they are adequately overseeing their franchisees, a model that has been increasingly adopted. The number of students at franchised providers more than doubled between 2018/19 and 2021/22, to 108,600 (4.7% of all students). We are concerned that, for some providers, reliance on franchising is material to their financial sustainability. Some providers assume student numbers will continually grow to remain viable, but we are not persuaded that this is a credible assumption for them all.
It is extraordinary that lead providers can retain such a high proportion of tuition fees – in some cases likely to be between 12.5% and as much as 30%. The Office for Students (OfS) described some of the tuition fee amounts retained by lead providers as “quite shocking”. With franchised providers also taking profits, a significant proportion of student funding may not be spent on giving students the best possible university experience and better educational outcomes. What makes this even more unpalatable is the lack of public information, which means students do not necessarily know if they are studying at a franchisee, how much is being spent on their teaching, or how the quality of teaching compares to other providers.
