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Rogue operators that offer poor-quality courses on behalf of English universities in order to exploit the student loan system face a crackdown, under plans outlined by ministers on Thursday.
The Department for Education is proposing reforms to tighten controls on university franchising arrangements, after an investigation by the National Audit Office found fraudulent providers cost taxpayers £2mn in 2022-23.
Under the plans, course operators with more than 300 students will need to register with the Office for Students “to ensure their courses meet rigorous quality standards” in order to receive funding, or face fines or possible suspension.
More than half of 341 franchised institutions are currently unregistered, the department said on Thursday.
The growing number of franchised providers in higher education has been partly driven by the financial crisis facing universities, which are looking to increase student numbers in a bid to offset high costs and a long-running freeze in domestic tuition fees.
The number of students enrolling on franchised courses more than doubled from 50,400 in 2018-19 to over 130,000 this academic year, according to departmental figures.
The NAO report found that 53 per cent of the £4.1mn fraud detected by the Student Loans Company involved courses from franchised providers, despite accounting for only 6.5 per cent of total loan-funded students during the 2022-23 academic year.
The investigation uncovered a range of fraudulent activity, including loans being paid to students who had not met course admission criteria and were unable to provide an acceptance letter to the Student Loans Company, the government body that oversees course financing.
It also found that some providers were not checking whether students were attending their courses despite this being a condition of loan funding.
Some franchised providers also used agents or paid cash bonuses to persuade students to sign up to courses, it found.
Education secretary Bridget Phillipson said: “We are committed to cracking down on rogue operators who misuse public money and damage the reputation of our world-class universities.
“The credibility of our universities is at stake, but these proposals seek to protect students and safeguard taxpayers’ money.”
The DfE’s move to protect standards in the higher education sector comes during a period of financial uncertainty for universities.
Several universities have reopened voluntary severance schemes, which could potentially lead to the loss of nearly 1,000 jobs, as they struggle to recruit lucrative international students, whose fees account for a growing share of the sector’s income.
Data published on Thursday by the university admissions service Ucas revealed that a number of Russell Group universities were among the dozens of institutions hit by a double-digit decline in new international undergraduates during the 2024 application cycle.
The hardest hit Russell Group members were Newcastle University and the University of Sheffield, where admissions declined 26 per cent and 23 per cent respectively.
Newcastle University announced its voluntary severance scheme last week in an attempt to save £20mn, 5 per cent of its pay budget — or the equivalent of 300 full-time positions, according to a memo seen by the Financial Times.
Newcastle University said it was “not immune” to the funding challenges facing the higher education sector.
Universities outside of the Russell Group have also been affected. The University of East Anglia is looking to reduce its headcount by 163 full-time equivalent staff in order to save £11mn, despite experiencing a 73 per cent increase in international undergraduate admissions for the current academic year.
Jo Grady, general secretary of the University and College Union, said her organisation was willing to ballot for strike action in response to job cuts. “Our members refuse to stand by and allow university managers to commit academic vandalism on such a grand scale . . . Unfortunately, serious industrial unrest cannot be ruled out.”
Cardiff University on Tuesday announced plans to cut 400 jobs, as well as the merging of departments and cuts to multiple courses including nursing.
The Department for Education said: “We’ve been up front about the tough financial situation we’ve inherited in relation to [higher education] providers in England, and we are determined to put our universities on a secure footing after years of financial challenges.”
The government announced last year that tuition fees would start to rise in line with inflation from 2025-26.
