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NAO exposes ‘potential misuse of millions’ at private colleges

The National Audit Office (NAO) has claimed that millions of pounds of public money may have been misused on student loans and grants at private higher education colleges.
Following an investigation, the watchdog claims that as of October 2014, as much as £50 million may have been wrongly spent on higher national students, who may not have been registered to take exams.
In 2012-13, meanwhile, dropout rates at some colleges were said to be as high as 20% - five times the average at mainstream universities.
The investigation follows runaway growth in the sector, driven the government's decision to open up the publically funded student loans system to 'alternative providers' (APs) in 2011. 
Between 2010-11 and 2013-14, tuition fee and maintenance loans and grants to students at APs rose from around £50 million to £675 million. And last year the Department of Business, Innovation & Skills (BIS) revealed it had overspent by £80 million on AP student funding.
In response, it's capped recruitment across the whole sector this year and reduced the number of colleges permitted to access funding to around 100 - down by about 50.
Commenting on the NAO's investigation, chair of the Public Accounts Committee Margaret Hodge MP said: “BIS went ahead with its reforms to expand the role of private colleges without ensuring there were controls in place to ensure that taxpayers’ money was used for its intended purpose of supporting higher education and not for private gain.
“This extraordinary rate of expansion, high drop-out rates, and warnings from within the sector ought to have set alarm bells ringing.”
A BIS spokesperson said private colleges still offered students “a wider choice" in higher education, but added: "We will continue to investigate and take robust action against any provider failing to meet the high standards expected of them.
"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.”
The Public Accounts Committee will question representatives of BIS, the Student Loans Company and the Higher Education Funding Council for England on 15 December. 
The NAO's report highlights a series of potential abuses between 2012 and 2014 including:
  • Of the 11,190 loan backed EU students studying at APs between September 2013 and May 2014, 50% were either unable or chose not to provide evidence that they were eligible for student support. This led to payments being suspended. 
  • Dropout rates at nine alternative providers were higher than 20% in 2012-13, compared to an average of 4% in the rest of higher education. 
  • In 2012-13, 20% of Higher National students recruited by alternative providers and claiming student support may not have registered with the qualification awarding body Pearson Edexcel. If students aren't registered, they are unable to attain the qualification they have enrolled for.
  • Between 2012 and 2014, BIS suspended payments to seven providers and their students owing to concerns that providers had enrolled students onto unapproved courses.
  • The NAO claims a "lack of clarity has existed within BIS and its partner organisations about which courses were approved for student support". Until September 2014, BIS did not hold a definitive master list for approved courses and, instead, a number of lists existed.

Posted on: 01/12/2014

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