Over £5m in loans paid to ‘ineligible’ students

1 Dec 14
The chair of the Public Accounts Committee has warned that millions in public money could be misused after auditors found that £5.4m was given to nearly 1,000 students at alternative colleges that were not eligible for support.

By Richard Johnstone | 2 December 2014

The chair of the Public Accounts Committee has warned that millions in public money could be misused after auditors found that £5.4m was given to nearly 1,000 students at alternative colleges that were not eligible for support.

In an investigation into funding for students who study at 140 alternative higher education institutions, the National Audit Office found students from the European Union had received support they were not entitled to.

According to the NAO, half of the 11,191 EU students applying for maintenance support between September 2013 and May 2014 were unable to provide evidence that they met the residency requirements for support. Prior to this, the Student Loans Company had already established that, by the end of October 2014, 992 ineligible students had received £5.4m of support before payments were suspended.

Alternative institutions in England offer HE qualifications without any direct funding from the Higher Education Funding Council for England.

The NAO investigation followed concerns raised by the Department for Business, Innovation and Skills and media reports about misuse of the student loans system by some providers.

Among its conclusions, the report also found that some colleges had recruited students onto courses the department had not approved, who had then received support. In addition, some providers have given BIS inaccurate information about student attendance.

In a statement released alongside the report, PAC chair Margaret Hodge said auditors had exposed the potential misuse of millions of pounds of public money.

‘It is incredible that 992 students from the EU who were not eligible for publicly funded support received a huge £5.4m from the Student Loans Company before payments to them were suspended,’ she said.

She highlighted that, according to the NAO, the number of students claiming support for courses at private colleges went up by 650% between 2010/11 and 2013/14, from 7,000 to 53,000. Yet in 2012/13, more than 20% of students at some providers dropped out of their courses after the provider had received its tuition fees and the students their loans. This is compared to just 4% for the rest of the higher education sector.

‘This extraordinary rate of expansion, high drop-out rates, and warnings from within the sector ought to have set alarm bells ringing,’ Hodge added.

‘As government hands more and more taxpayers’ money to private companies and institutions to deliver services for the public good, we have to be able to follow the taxpayers’ pound wherever it is spent.

‘I look forward to hearing from the Department for Business, Innovation & Skills, the Student Loans Company and the Higher Education Funding Council for England on 15 December about how they are getting on top of this.’

Responding to the report, a BIS spokesman said alternative providers increase the choice of higher education available to students.

However, he said the department was taking action against any provider failing to meet high standards.

“We took action to control the numbers of students at alternative providers during 2013/14, and introduced comprehensive student number controls for alternative providers in 2014/15 so as to limit the growth in full-time student numbers,’ he added.

'As the NAO report notes we have implemented new controls to ensure that there is a clear register of designated courses.'

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