A lack of government oversight has left the student finance system open to exploitation from systemic and organised fraud and abuse. In a report published today, the Public Accounts Committee (PAC) warns of a lack of oversight of ‘franchised providers’ – institutions providing courses on behalf of universities as part of a commercial partnership, or franchise.
In 2022/23, detected fraud involving franchised providers totalled £2.2 million, 53% of the £4.1 million fraud identified by the Student Loans Company (SLC). Two-thirds of franchised providers are not registered with the Office for Students (OfS), which sets conditions for registered institutions designed to protect students, assure quality, and ensure good governance. The PAC’s inquiry found that the responsibility to tackle fraud and abuse of student funding is not fully embedded in ways of working at the OfS, SLC, and the Department for Education.
The growing use of franchised providers presents risks to for students. Some higher education providers rely on franchising growing student numbers to remain financially viable. Numbers of students at franchised providers more than doubled between 2018/19 and 2021/22, to 4.7% of all students, The OfS told the PAC’s inquiry that it was shocked by the high amount of tuition fees retained by providers using franchisees (up to 30% in some cases). This raises quality concerns, as if a university takes a fee percentage, and a franchisee generates a profit, the amount spent on students is reduced.
The report further finds that a lack of transparency means students do not have the information they need to make well-informed decisions about their studies. Some franchised providers have course completion rates as low as 60%, compared to 90% across the higher education sector, but OfS does not publish data in a way that distinguishes between lead and franchised providers. Some students may even be unaware that they are at a franchised provider, as well as how much of their tuition fees a franchisee will receive, or which of the main institutions’ services they can use, such as welfare services.
