Experts To Investigate Allegations Of Student Loan Fraud

The education secretary has called in counter-fraud experts to investigate allegations that tens of millions of pounds of student loans were taken out by people who would never make the effort to pay them back. It comes after a Sunday Times investigation which revealed it found evidence that people were taking out the loans simply to study for degree level at small universities, with no intention of paying them back. Bridget Phillipson has called on the Public Sector Fraud Authority (PSFA) to take charge of the government’s response to the claims and assist with the investigation.

She had described it in the Sunday Times as “one of the biggest financial scandals in the history of our universities industry”. The story said most of the students being investigated are thought to come from franchise universities – small colleges contracted to deliver courses on behalf of high-performing universities. It said it suspected so-called “organised recruitment” of Romanian nationals to register for specific courses.

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The Student Loans Company (SLC) also found suspicious applications using false documents and multiple addresses, and franchised universities recruiting people with weak English, the paper continued. Phillipson had previously said the SLC had written to the police and other law-enforcement agencies to investigate why some Romanian students were disproportionately signing up for certain universities, but nothing was being done to guard against wholesale exploitation. “But today’s news makes us do more and do it more quickly to safeguard the public purse. “I won’t stand a penny for exploitation of taxpayers’ money,” she said.”

She went on to say that franchising at some universities was “less about increasing access and more about increasing overheads”, and that the Office for Students (OfS) – the non-departmental public body responsible for the regulation of the higher education market in England – should put “guardrails” around it. Ms Phillipson said she would introduce legislation so the OfS could gain new powers to safeguard public cash. The total student debt outstanding in the UK is £236.2bn. International students with settled status, for example, are eligible to borrow government-funded loans to pay for some of their maintenance costs and fees, including tuition.

Tuition is paid directly to the institution of education or university in lieu of tuition, and maintenance is paid directly to the institution of education or university. Repayment of the loan is made by installment into a student bank account. They must repay their loan, although not until they have graduated and paid an amount – £24,990 to £31,395 currently – depending on where they are in the UK.

In England only the loan is repaid after 40 years. The Public Sector Fraud Authority is a Cabinet Office and Treasury division that assists the government and public authorities to tackle fraud. The Department for Education released a statement that it had already worked to stop fraudulent franchise operators in an effort to prevent fraud and would “overhaul regulation” so that the OfS is not further protected with taxpayers’ money. A spokesperson said: “Where fraud or abuse occurs, we have the powers to recover from scammers – and we will not be shy about doing so.”

“We will push for tough new laws so the OfS can act swiftly to root out scammers once and for all.” OfS chief executive Susan Lapworth labelled the “sharp practices” exposed by the Sunday Times investigation as “totally unacceptable” and “amounting to an appalling misuse of public money”. She said the OfS would be working with the Department for Education and the SLC to follow up on the issues. On behalf of the 141 universities it represents, the OfS would applaud the Government’s proposal that franchise partners would need to be compelled to register with the OfS.

“If there is unequivocal evidence of criminality, we are unreservedly in support of this,” a spokesperson said, and added that universities had taken “significant steps to restrict access” over the past two years. He added: “We should also remember the appropriate and useful role of some franchise provision in meeting the needs of students for whom traditional models of higher education are difficult to work around work, or where learning closer to home is essential.”

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