Fraud experts are set to investigate suspicions thousands of students are fraudulently claiming hundreds of millions of pounds in student loans with no plans to study – or pay the money back.
The Public Sector Fraud Authority has been directed by Education Secretary Bridget Phillipson to start work immediately to halt the “growing threat” and support investigations that are already under way.
It follows a Sunday Times investigation which reports students with “absolutely no academic intent” are enrolling on degree courses in order to claim tens of thousands of pounds with no intention of repaying the money.
For the 2025-26 academic year, students can apply for tuition fee and maintenance loans of up to £25,440.
The money is only paid back once the student has left university and their income has reached a certain threshold, depending on the loan plan, starting at about £25,000 a year. The debt is written off if not paid within 40 years.
Education Secretary Bridget Phillipson has called for the investigation. Pic: PA
Writing for the newspaper, Ms Phillipson said the allegations of potential fraud point to “one of the biggest financial scandals universities have faced”.
Most of the suspected incidents are believed to be at “franchised” universities – colleges paid to provide courses for established universities – and officials are concerned there is “organised recruitment” of Romanian nationals, the Sunday Times reported.
The investigation into the system came after the Student Loans Company noticed suspicious applications involving fake documents, it said.
‘Not enough care taken to join the dots’
In her piece, Ms Phillipson said the “revelations” deal “a hammer blow to the integrity of higher education” in the UK and “demand the firmest action”.
The Student Loans Company has been working with law enforcement agencies to investigate the prevalence of some Romanian students at certain institutions, the education secretary said, “but not enough care was taken to join the dots of wider abuse taking place across the system and to slam the door shut on widespread abuse”.
Ms Phillipson said she will also bring forward new legislation “at the first available opportunity” to ensure the Office for Students “has tough new powers to intervene quickly and robustly to protect public money”.
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A Department for Education spokesperson said it would “stop at nothing to protect public money” and that any potential misuse of student loans “is an insult to hard-working students striving for better opportunities”.
It said the government’s Plan for Change, announced by Prime Minister Keir Starmer in December, “will restore trust” in the UK’s universities.
“We have already taken clear action to crack down on rogue franchise operators to tackle fraud, and we’ll go further,” the spokesperson said. “We will overhaul regulation so the Office for Students better protects taxpayers’ money. In the meantime, we have asked the OfS to clamp down on franchising.”
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If misuse or fraud is uncovered, the government has “powers to claw back payments – and we won’t hesitate to use them”, the statement added. “We will bring in tough new laws to ensure the OfS can quickly stop bad actors gaming the system once and for all.”
Susan Lapworth, chief executive of the OfS, said: “The type of sharp practices alleged by this investigation are entirely unacceptable. They represent shocking misuse of public funding and take advantage of genuine students who are not getting the education they deserve.”
