Education Secretary Orders Probe Into Student Loan Fraud Allegations

The Department for Education said it has taken action to ‘crack down on rogue franchise operators’ to tackle fraud.

Education Secretary and Women and Equalities Minister Bridget Phillipson arrives in Downing Street for a Cabinet meeting in London, on March 18, 2025. James Manning/PA Wire

The education secretary has ordered a probe into potential fraud of the student loans system, potentially costing the taxpayers tens of millions of pounds.

Bridget Phillipson has asked the Public Sector Fraud Authority to coordinate a cross-government response to these allegations and support any investigations already underway into what she said could be “one of the biggest financial scandals in the history of our universities sector.”

The minister’s remarks follow an investigation by The Sunday Times, which claimed that individuals were applying to higher education courses and obtaining student loans—which includes tuition fee loans and maintenance grants for living expenses—while having no intention of studying or paying back the money.

The newspaper said that the majority of potential fraud cases relate to franchised higher education courses, which is where established universities go into partnership with colleges to deliver their curriculum.

The Sunday Times also alleged that Romanian nationals made up a large proportion of these applicants and there is concern among officials that there had been some level of organised recruitment for the scams.

The Department for Education (DfE) told reporters that it has taken action to “crack down on rogue franchise operators” to tackle fraud, and has asked the Office for Students (OfS) to clamp down on franchising.

“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,” the DfE spokesperson said.

Around £20 billion is loaned to around 1.5 million university students in England every year.

Wide-Scale Organised Exploitation

Writing in The Sunday Times, Phillipson said that the Student Loans Company, a government-owned body which administers student loans, has been working with law enforcement to investigate the prevalence of Romanian students at certain institutions, where fraud is suspected.

She continued that while many Romanian students are legitimately undertaking higher-education courses, “the investigative work the Student Loans Company has already done to block payments to individuals wrongly claiming support strongly suggests that we are seeing wide-scale organised exploitation both of Romanian students and of the UK taxpayer.”

British citizens and foreign nationals with settled status can access full financial support from the government, so long they have lived in the UK for at least three years before their university course starts.

The minister said that the problem was concentrated in a small number of franchise colleges in the sector. She said that five providers accounted for almost half of all funding applications from Romanian students, which she said pointed to targeted abuse of the student loan system.

She also instructed the OfS to set out stronger requirements for universities franchising their courses and will bring forward legislation at the earliest opportunity which will give the regular new powers to intervene “quickly and robustly” to protect public money.

University graduates in a file photo on Oct. 12, 2011. Chris Radburn/PA

Susan Lapworth, chief executive of the OfS, said on Monday: “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.”

Lapworth added that at present, the OfS can only act in relation to registered higher education providers and that franchised delivery providers are not required to register with the regulator. She continued that she therefore welcomes the government’s proposal “to close this loophole by bringing many more of these providers under our regulatory remit.”

£236 Billion in Outstanding Student Loans

The probe comes after the amount of outstanding student loan debt had reached £236.2 billion by March 2024, with predictions that the amount could reach around £500 billion by the late 2040s, in today’s prices.

In 2023, the terms for student loan repayment had changed, after forecasting estimated that only 27 percent of graduates from previous cohorts would repay their student loans in full.

For full-time undergraduates who enrolled after September 2023, the threshold for starting to repay student loans fell from £27,295 a year to £25,000, and the repayment period was extended from 30 to 40 years, after which any remaining debt is written off.

Since these changes, the government now expects that around 65 percent of graduates will repay their student loan.

The issues also add to the growing challenges facing the sector, as universities grapple with increasing financial pressures, including job cuts and course closures at many institutions.