Fraud experts will investigate the university loans system amid concerns that students are falsely claiming millions of pounds without intending to study, the education secretary has announced.
Bridget Phillipson has instructed the Public Sector Fraud Authority to coordinate the response to allegations that individuals with no genuine academic intent are enrolling in degree courses to secure loans.
The claims were first revealed in an investigation by the Sunday Times, which reviewed financial documents and company accounts and interviewed a dozen sources from the Student Loans Company (SLC), the Department for Education, the Office for Students (OfS), and university lecturers.
The newspaper reported that most of the students under scrutiny are believed to be at “franchised universities”, which are colleges paid to provide courses for established universities.
It also revealed the concern of a potential “organised recruitment” of Romanian nationals in particular to enrol on courses.
Writing in the newspaper, Phillipson described the revelations as “one of the biggest financial scandals in the history of our universities sector”. She 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.
“We must go further and faster to protect the public purse. I will not tolerate a penny of taxpayers’ money being misused. That is why I can announce that I have asked the Public Sector Fraud Authority to coordinate immediate action across the system to halt this growing threat.”
Phillipson insisted that the blame rested squarely with the Conservatives for the growing issues within the university loans system. She argued that the last government’s decision to expand franchised education in 2016, without addressing underlying financial instability, paved the way for widespread abuse.
She criticised the Tories for ignoring repeated warnings about the risks of fraud, writing: “But just as they ignored countless warnings about billions of pounds of Covid fraud, the Conservatives dragged their feet.”
She also noted that the SLC is working with law enforcement agencies to investigate the prevalence of “some Romanian students at certain institutions”, adding that “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”.
Though the OfS was created to ensure universities were high-quality and to prevent fraud, it was “directed by the Conservatives to pursue culture wars in our universities”, she said.
Phillipson has promised to bring forward new legislation “at the first available opportunity” to ensure the OfS is equipped with tough new powers to intervene quickly to protect public money.
A spokesperson for the Department for Education said: “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 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 coordinate 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.”
Susan Lapworth, chief executive of the OfS, said: “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.”
