Probe into potential exploitation in university loans system under way

Education Secretary Bridget Phillipson has asked counter-fraud experts to lead an investigation into the university loans system over fears students are claiming millions of pounds with no intent to study.

Ms Phillipson directed the Public Sector Fraud Authority to help co-ordinate the response to the allegations and support the investigations already under way.

It follows a Sunday Times probe which reports thousands of students with “no academic intent” are suspected of fraudulently claiming hundreds of millions of pounds from the country’s university loans system.

The newspaper said most of the students under scrutiny are thought to be at “franchised” universities, which are colleges paid to provide courses for established universities.

‘Suspicious applications’

There is a concern of potential “organised recruitment” of Romanian nationals in particular to enrol on courses, the newspaper said.

The Sunday Times said the Student Loans Company (SLC) spotted suspicious applications involving fake documents and address duplication, and franchised colleges are enrolling students who cannot speak adequate English.

Writing for The Sunday Times, Ms Phillipson said: “Today’s revelations of major misuse of public money and potential fraud by students in franchised universities deal a hammer blow to the integrity of higher education in this country.

‘They point to one of the biggest financial scandals in the history of our universities sector.

‘They demand the firmest action.”

She added that franchising in some institutions has “become less about expanding access and more about meeting expanding overheads for hard-up universities”, and said the system also “lacks necessary guardrails against abuse”.

‘Immediate action’

Ms Phillipson said the Office for Students “should have provided these guardrails”.

She said she has asked the Public Sector Fraud Authority to “co-ordinate immediate action across the system to halt this growing threat”.

Ms Phillipson said: “The Student Loans Company has been working with law-enforcement agencies to investigate the prevalence of some Romanian students at certain institutions, but not enough care was taken to join the dots of wider abuse taking place across the system and to slam the door shut on widespread abuse.

“But today’s revelations demand that we must go further and faster to protect the public purse. I will not tolerate a penny of taxpayers’ money being misused.”

Ms Phillipson said she 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”.

‘Insult’

A Department for Education spokesperson said: “We will stop at nothing to protect public money; any misuse of student loans is an insult to hard-working students striving for better opportunities.

“Our plan for change will restore trust in our universities. We have already taken clear action to crack down on rogue franchise operators to tackle fraud and we’ll go further. We will overhaul regulation so the Office for Students (OfS) better-protects taxpayers’ money. In the meantime, we have asked the OfS to clamp down on franchising.

“The Education Secretary has asked the Public Sector Fraud Authority to help co-ordinate the cross-government response to these extremely concerning allegations and support the investigations already under way.

“Where misuse or fraud is found we have powers to claw back payments – and we won’t hesitate to use them. We will bring in tough new laws to ensure the OfS can quickly stop bad actors gaming the system once and for all.”

The Student Loans Company has blocked student finance payments after similar concerns were previously identified, it is understood.

The Student Loans Company operates Student Finance Wales’ services on behalf of the Welsh Government.

Susan Lapworth, chief executive of the OfS, said: “The public must have confidence that taxpayers’ money in the form of student loans is well spent – with genuine students attending high-quality courses that lead to good outcomes. This must include basic expectations such as students attending regularly and being proficient in the English language.

“The type of sharp practices alleged by this investigation are entirely unacceptable. They represent shocking misuse of public funding and take advantage of genuine students who are not getting the education they deserve.”