Fraud experts to probe ‘targeted abuse’ of student loans

Education secretary Bridget Phillipson has asked a government fraud unit to investigate the “growing threat” of bogus students enrolled in franchised higher education courses to help crack what she called “one of the biggest financial scandals in the history of our universities sector”.

Writing in The Sunday Times, Phillipson said she was taking the “firmest action” possible after learning about the “disproportionately large number of Romanian students who are resident in the UK and who receive student funding from the Student Loans Company”.

While some are “legitimately undertaking higher education courses”, Phillipson explained the Student Loans Company had already started to “block payments to individuals wrongly claiming support” – a pattern of activity which “strongly suggests that we are seeing wide-scale organised exploitation both of Romanian students and of the UK taxpayer”.

It follows further claims about fraud within franchised providers which The Sunday Times alleged were enrolling students with “absolutely no academic intent” purely for the purposes of claiming student loan money that the individual had no intention of paying back.

Nationally most of the suspected incidents of student loan fraud are believed to take place at these types of providers – usually colleges without their own degree-awarding powers that are paid to provide courses for established universities. About half of the £4.1 million in detected student loan fraud in 2022-23 related to a sector that made up less than 5 per cent of students, a parliamentary committee report found last year.

Announcing plans to stamp out “targeted abuse of the system”, Phillipson said she had asked the Public Sector Fraud Authority, a Cabinet Office-led unit established in 2022 to help reduce fraud and error, to “co-ordinate immediate action across the system to halt this growing threat”.

“We will then act quickly on its findings to make the fundamental changes that the system badly needs, including putting an end to the abuse of the system by agents recruiting students based in this country,” said Phillipson, who blamed the situation on the last Conservative government which had been “warned of the risks of abuse” but “dragged their feet” and chose to “pursue culture wars in our universities”.

She has also told the Office for Students that this issue should remain a “majority priority for the regulator”, stressing “not enough care [has been] taken to join the dots of wider abuse taking place across the system”.

In January, new rules were proposed that would require franchised providers with more than 300 students to register with the regulator.

The OfS should go further still, said Phillipson, and “urgently set out stronger requirements of universities that franchise courses to other organisations ahead of the tough regulation we have announced coming into force”, continuing that she had “asked the Student Loans Company to further step up its investigative work”.

“Finally, I will also bring forward new legislation at the first available opportunity to ensure the Office for Students has tough new powers to intervene quickly and robustly to protect public money, in addition to the stronger remit I have given it to monitor university finances,” said Phillipson.

In response to the new revelations, Universities UK said its members are “clear about the need to uphold high standards in the management of franchise partnerships”.

“If there is evidence of criminal behaviour, we completely agree that it must be rooted out. We welcome the extensive actions to tighten controls universities in our membership have taken over the last two years, essential vigilance which must be ongoing.”

jack.grove@timeshighereducation.com