The UK Secretary of State for Education, Bridget Phillipson, has requested a thorough investigation by counter-fraud experts regarding allegations that individuals are improperly claiming millions of pounds in student loans without genuine intent to pursue education.

This inquiry follows a report from a national newspaper that indicates evidence of individuals enrolling in degree programs at smaller colleges solely to access government-backed loans, with no intention of repayment.

The Public Sector Fraud Authority (PSFA) has been called upon to lead the investigation and to coordinate the government's response to these serious allegations, as well as to support ongoing investigations.

Phillipson emphasized the gravity of the situation, describing it as potentially representing 'one of the biggest financial scandals in the history' of the higher education sector.

According to the initial findings, many of the students under investigation are alleged to be enrolled at franchised colleges—smaller institutions allowed to offer courses from established universities.

Reports suggest organized recruitment efforts targeting Romanian nationals to enroll in these courses, raising concerns about fraudulent practices linked to student loan applications.

The Student Loans Company (SLC) has reported that it has identified instances of suspicious applications, including those featuring falsified documents and duplicated addresses.

Additionally, it has noted that some franchised colleges appear to be admitting students who do not possess sufficient English language skills for course requirements.

Phillipson stated that while the SLC has undertaken collaborative investigations with law enforcement agencies focusing on the presence of Romanian students at certain institutions, she believes these efforts require strengthening to prevent broader misuse.

She asserted, 'I will not tolerate a penny of taxpayers' money being misused,' and advocated for legislative measures to enhance the oversight capabilities of the Office for Students (OfS), the independent regulator of higher education in England.

The UK currently faces a staggering £236.2 billion in student loan debt.

Students, including those from overseas with settled immigration status, are eligible for government-subsidized loans that assist with both tuition fees and living expenses.

Tuition fees are paid directly to educational providers, while maintenance loans are transferred to students' personal bank accounts in installments.

Students are required to start repaying their loans only after reaching a specified income threshold, which ranges between £24,990 to £31,395, depending on their residency within the UK. In England, these loans are written off after a period of 40 years.

The PSFA operates under the auspices of the Cabinet Office and Treasury, striving to diminish fraud and enhance fiscal accountability within public services.

In response to concerns regarding rogue franchising practices, the Department for Education has already implemented measures aimed at curbing fraudulent operations and intends to reform regulatory frameworks to ensure stronger protections against the misuse of taxpayer funds.

A spokesperson for the Department affirmed that they possess mechanisms to reclaim payments in cases of identified misuse or fraud, committing to enforce these powers decisively.

Additionally, the spokesperson highlighted intentions to introduce stringent new legislation to empower the OfS in its regulatory role.

Susan Lapworth, the OfS chief executive, characterized the allegations as 'entirely unacceptable' and described them as a profound misuse of public funds.

The OfS has committed to working jointly with the Department for Education and the SLC to address these critical issues.

Universities UK, the representative body for 141 higher education institutions, expressed its support for initiatives requiring franchised partners to be registered with the OfS.

A spokesperson highlighted the necessity of tackling any evidence of criminal conduct, while acknowledging the significant role that legitimate franchising can play in catering to the needs of students who may require more flexible educational options, particularly those balancing work commitments or seeking studies closer to their homes.