| Thousands of students enrolled with a new breed of private higher education colleges are not registered to take recognised exams, the government’s spending watchdog revealed on Tuesday, raising fears that huge numbers of undergraduates have been benefiting from taxpayer subsidy without undertaking meaningful study.
The National Audit Office also warned that the dropout rate among students at nine of the “alternative higher education providers” set up following reforms introduced by the former higher education minister David Willetts in 2012 was in excess of 20%. That is five times the dropout rate seen in traditional universities, with which the new colleges were designed to compete.
The NAO warns that the private institutions, which can charge students £6,000 a year in fees, have not been properly monitored and pointed out that students attending them were eligible for cheap loans and in some cases grants.
Students at “alternative providers” – organisations which the government was hoping would lead ground-breaking market reforms in the higher education sector – received £425m through the Student Loans Company in the academic year 2012-13. Most study higher national diplomas (HNDs) or certificates (HNCs).
By comparing data on those claiming student fees with those registered with exam board Pearson/Edexcel, the spending watchdog identified 2,963 students – 20% of the total studying HNDs – who accessed student funding in 2012-13 without ever being registered to sit exams. This figure excluded students who dropped out that year. In total those students could therefore have accessed over £50m.
Margaret Hodge, the chair of the Commons public accounts committee, said the report exposed the “misuse” of public money, adding that the business department “went ahead with its reforms to expand the role of private colleges without ensuring there were controls in place”.
“This extraordinary rate of expansion, high dropout rates, and warnings from within the sector ought to have set alarm bells ringing,” she added.
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For two of the largest of these new institutions – London School of Business and Finance, and London School of Science and Technology – the dropout rate rose to about five times the average. Part of the problem stemmed from the rapid recruiting of foreign students, the NAO found. The auditor found that another group of 5,500 undergraduates from the EU have been unable to prove they were either living in the UK or entitled to public funding.
A separate internal government inquiry found that 1,000 of these students, most of whom come from Bulgaria and Romania, were definitely fraudulent and had already claimed £5.4m in student loans before being found out. The government has been able to recover just 7% of that money so far, the NAO said.
In 2012 Willetts said he wanted to see alternative providers take on established universities and offer students even more choice. These colleges were allowed to charge £6,000 a year in fees, which their students could draw from the government-backed Student Loans Company.
But though they were in receipt of public money, Willetts was unable to get new parliamentary powers he needed to hold private colleges to proper account with inspection regimes or demands to see their books, after Lib Dems backed out of supporting a new education bill.
Tuesday’s report was prompted by a Guardian investigation into the sector which found that lectures were teaching to empty or near-empty classrooms. Students and staff alleged that bogus students who were barely literate were using colleges as a “cash point” to access loans they believed they would never pay back.
The NAO findings highlighted that the Department for Business, Innovation and Skills (BIS) lacked basic powers to monitor publicly funded students’ attendance and their progress, even as it relaxed the purse strings to fund private sector growth. It said the department had not defined “an expectation of what might constitute an acceptable dropout rate” for the sector, let alone scrutinised whether the rates were too high.
Sally Hunt, the general secretary of the University College Union, which represents academic and other college staff, said the government failed to police the system it had created. “While we are pleased the misuse of public funds is finally being brought to light, we remain angry that it took so long to happen. We raised the issues of for-profit colleges’ access to taxpayers’ money time and again with ministers, but we were ignored at every turn.”
A spokesperson for the Department of Business said private colleges still offered “a wider choice of higher education” to students and that they would take robust action to correct failing standards. “We will continue to investigate and take robust action against any provider failing to meet the high standards expected of them. The dropout rates at a small number of alternative providers have been higher than the average among alternative providers. The NAO have made a helpful recommendation on dropout rates which we will consider as part of our ongoing strengthening of the regulation of the network.”
• This article was amended on 3 December 2014. An earlier version said the NAO report named London School of Business and Finance and London School of Science and Technology as the two largest of the new institutions. They are named as two of the largest. |