The UK government has launched a sweeping investigation into what is being described as one of the largest financial scandals to hit the country’s higher education sector. The move comes after allegations that millions of pounds in student loans are being fraudulently claimed by individuals with no real intention to study.
Education Secretary Bridget Phillipson has tasked the Public Sector Fraud Authority (PSFA) with leading the inquiry and coordinating a nationwide crackdown, following a damning exposé published by The Sunday Times.
Fake Students, Real Loans
The report revealed troubling evidence of individuals enrolling in degree courses at small franchised colleges — institutions that deliver courses on behalf of larger universities — primarily to access taxpayer-funded student loans. Many of these so-called “students” allegedly have no plans to attend classes or repay the loans.
Particularly alarming is the suggestion of organised recruitment networks, with Romanian nationals being disproportionately represented among those under scrutiny. Fake documents, duplicate addresses, and students with poor English-language skills are all part of the alleged abuse, according to findings by the Student Loans Company (SLC).
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A System Under Exploitation
Student loans in the UK can include tuition fees — paid directly to the education provider — and maintenance loans, which are paid into students’ bank accounts in instalments. With no repayments required until graduates reach an income threshold (currently between £24,990 and £31,395), and loans written off after 40 years in England, the system is vulnerable to exploitation. As of now, the total student loan debt stands at £236.2 billion.
Government Vows Tough Action
Writing in The Sunday Times, Phillipson labelled the unfolding scam as “one of the biggest financial scandals in the history of our university sector.” She criticized franchising models at some universities, suggesting they have become more about generating income than expanding access to education. “These revelations demand that we must go further and faster to protect the public purse,” she wrote. “I will not tolerate a penny of taxpayers’ money being misused.” She also accused the Office for Students (OfS) — the higher education regulator — of failing to provide adequate oversight. Legislation is now being prepared to give OfS stronger powers to monitor, investigate, and shut down rogue operations.
Authorities Respond
The Department for Education issued a statement affirming that action is already underway to tackle fraud linked to franchised colleges. A spokesperson said:
“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.”
OfS Chief Executive Susan Lapworth called the allegations “entirely unacceptable” and pledged to work closely with the Department for Education and the SLC to address the misuse.
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Universities React
Universities UK, which represents 141 higher education institutions, has voiced support for mandatory registration of franchise partners with the OfS. A spokesperson emphasized that while fraudulent activity must be stamped out, it’s important to recognize that franchise partnerships also help provide flexible education options to students who cannot follow the traditional university model.
“If there is evidence of criminal behaviour, we completely agree that it must be rooted out,” the spokesperson said, adding that universities had already taken “extensive actions to tighten controls” in recent years.
What’s Next?
With the PSFA, SLC, OfS, and law enforcement agencies now working in coordination, the government is expected to announce further steps to tighten loan eligibility, enhance oversight of franchised colleges, and pursue criminal prosecutions where necessary.
The unfolding investigation is expected to have wide-ranging implications for how the UK manages higher education funding and fraud prevention in the future.