Nicola Woolcock, Education Editor | Oliver Wright, Policy Editor, Wednesday January 17 2024, 6.10pm GMT, The Times
British universities are making millions of pounds from substandard and sometimes fraudulent courses run on their behalf by external companies.
A report reveals that more than 50 per cent of all student loan fraud last year came from so-called franchised provider, which run courses on behalf of universities, although they teach only about 5 per cent of the total student population.
Companies are allegedly enticing students to enrol with promises that they can “join a university without any qualification and get up to £18,500”. Some of the courses are being promoted through TikTok and Facebook, offering free laptops to those who sign up or suggesting they will have easy access to money.
Critics say that many of those who are recruited are unsuitable for the courses offered, and will never repay the taxpayer-funded tuition and maintenance loans for which they are eligible.
The companies running the courses can be paid up to £9,000 a year by the government for each student they recruit, and the universities sponsoring them take a cut of the payment.
Data from the Office for Students (OfS) also suggests that those students taking sub-contracted courses have significantly worse outcomes than those taught by the universities that are franchising them. On some contracted courses more than 40 per cent of students drop out before finishing their studies, compared with 25 per cent in their sponsoring universities.
There is nothing in the rules to stop universities contracting courses to third parties and taking a cut of the tuition fees, although they are supposed to be responsible for regulating their franchisees and ensuring that they offer good quality education.
As financial pressure on universities grows, however, there are concerns that they are using the system to boost their revenues with little or no oversight of the providers they accredit.
About two thirds of franchises are not registered directly with the OfS, and since 2018 the number of students using unregistered franchised providers has increased from 34,400 to 75,000. Most are enrolled in business and management-related courses.
A new report from the National Audit Office (NAO) has shown that the Student Loan Company (SLC) has detected suspected instances of fraud, potentially associated with organised crime, in more than 3,500 applications associated with £59.8 million of student funding at ten institutions.
The report adds that in the last academic year, 53 per cent of fraud detected by the SLC related to those registered at franchised providers, although these account for less than 5 per cent of all students and 6.5 per cent of all those funded by student loans.
The audit office warned that “weaknesses in the regulatory framework” made the higher education sector vulnerable to such fraud, and said that universities needed to be reminded of their responsibilities for vetting franchisees “as a matter of urgency”.
The report added: “There is insufficient evidence that students are attending and engaging with their courses. There is no effective standard against which to measure student engagement, which attendance helps demonstrate, and there is no legal or generally accepted definition of attendance. Providers themselves determine whether students are meaningfully engaged with their course.”
Susan Lapworth, chief executive of the OfS, said that universities must have effective control over any subsidiaries. “It is essential that student loan funding provided by taxpayers is properly protected,” she said. “Higher education institutions have obligations to comply with the rules that underpin the student loans system. The OfS has worked with the SLC to address concerns that have been identified in individual cases.”
However, Universities UK, which represents vice-chancellors, said that franchises were an important way of widening participation to more deprived students and promoting access to higher education.
A spokeswoman said: “While universities already have policies in place to ensure that all partnerships are undertaken responsibly, this report shows that there are significant and serious issues still to be addressed. We welcome the lessons learned from this work and it will help inform our thinking on this issue going forward.”
Chris Larmer, chief executive of the SLC, said the report had built upon the investigatory work of its financial crime prevention unit, adding: “We routinely perform monitoring activity to detect suspicious activity and have robust controls in place to ensure all payments are made, as stipulated by the student finance regulations.
“We take financial crime seriously and as noted in the report, we proactively raise issues of concern with the Department for Education and OfS, taking action to protect public funds wherever possible, within the scope of our powers and remit.
“It is essential that higher education providers meet their obligations under the wider regulatory regime, to ensure that student loan funding is protected and can be accessed as intended by regulation.”
Robert Halfon, the higher education minister, said: “It’s vital that all higher education providers in receipt of government funding provide value for money for the taxpayer. We have already taken action to boost the quality of higher education and are taking immediate steps to ensure providers who use franchising understand their responsibility for protecting public money and the significant investment students make in higher education.
“Franchising can be a good way to support more people from disadvantaged backgrounds into higher education, however I recognise there is more to do to strengthen oversight.”
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