Source: Alamy

The statistic was among several damning findings reported in the NAO’s report, published today, on its investigation into state support for students at private higher education colleges.

Margaret Hodge, the Labour MP who chairs the House of Commons Public Accounts Committee, which will hold a hearing into the report, said the NAO investigation “has exposed the potential misuse of millions of pounds of public money”.

The NAO was asked in May to investigate concerns about possible abuse of the student loans system by for-profit providers, following a 33-fold increase in the amount of public money paid out to students at such colleges since the coalition government came to power.

The NAO found that the average dropout rate for students at private providers accessing student support was 12 per cent in 2012-13. The average for students at institutions funded by the Higher Education Funding Council for England was 4 per cent.

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The number of for-profits with dropout rates above 20 per cent rose to nine in 2012-13, compared with just three in 2011-12. 

The report says for-profits’ higher dropout rates may be explained by their recruitment of a higher proportion of older or poorer students. But the rates “may also reflect the capability and motivation of the students, the quality of the education and support provided, or inappropriate recruitment by the provider”.

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It notes that neither the Department for Business, Innovation and Skills nor any of its “oversight bodies” has defined “what might constitute an acceptable dropout rate for providers that benefit from tuition fee loans”.

The report also confirms that European Union students at some alternative providers have claimed student support they were not entitled to.

It notes that between September 2013 and May 2014, BIS and the Student Loans Company investigated whether 11,191 EU students applying for maintenance support met residency requirements. Of the 5,548 who failed to demonstrate eligibility, 83 per cent were applying to just 16 alternative providers.

Nearly 1,000 ineligible students had received £5.4 million before payments were suspended at the end of October.

Between 2012 and 2014, BIS also suspended payments to seven providers and their students over concerns that students were enrolled on courses that were not approved for student support.

One provider – Guildhall College – had all of its course approvals revoked after it was discovered that it had accessed support for unapproved courses, and BIS “has taken steps to recover overpayments from two further providers where it concluded issues were substantiated” (London Empire Academy and ICE Academy).

However, the report also identifies a “lack of clarity” about which courses were approved for student support. A number of different lists were in circulation and BIS did not draw up a master list until September.

Meanwhile, 20 per cent of publicly-funded students on Higher National courses at alternative providers may not have been registered with the qualification awarding body in 2012-13, meaning they would be unable to attain the qualification, the report finds.

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“The SLC does not have powers to check that providers have registered students with an awarding body before making student support payments. No work has been undertaken by the oversight bodies into why there is this apparent discrepancy,” the report says.

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The report also notes three cases where BIS suspended payments due to concerns that providers had supplied incorrect information about student attendance.

Ms Hodge said the “extraordinary rate of expansion, high dropout rates, and warnings from within the sector ought to have set alarm bells ringing” about the alternative providers.

“Today’s NAO investigation has exposed the potential misuse of millions of pounds of public money, with EU students at some private colleges accessing public funds to which they were not entitled,” she said.

“It is incredible that 992 students from the EU who were not eligible for publicly-funded support received a huge £5.4 million from the Student Loans Company before payments to them were suspended.

“The department 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.”

She added that her committee would hear evidence from officials from BIS, the SLC and Hefce on 15 December following the report.

A BIS spokesman said alternative providers gave “a wider choice of higher education to students”. 

“It is important that the high quality of our higher education system is sustained and the government has taken a number of steps to improve the regulation of alternative providers,” he said.

“We will continue to investigate and take robust action against any provider failing to meet the high standards expected of them.”

paul.jump@tesglobal.com