Cash-Point Campuses: How Britain’s Student Loan System Has Been Plundered by International Fraudsters

Britain’s trust-based student loan scheme has been exploited by overseas organised crime syndicates, after decades of policy blunders and lax oversight have allowed sham students to siphon millions.

Britain’s higher education system is facing an unprecedented level of fraud in its antiquated loan system, with organised crime networks exploiting funding loopholes to extract hundreds of millions of pounds in public funds. Thousands of ‘students’, many with no intention of ever studying or repaying, have enrolled in degree courses purely to cash in on easily accessible loans, turning a scheme meant to expand educational opportunities into a free-for-all. The emerging picture is one of brazen criminality, with the Student Loans Company (SLC) uncovering at least six questionable college partnerships that funnel loans to sham students. In the past academic year alone, the SLC flagged over 3,500 suspicious applications, equivalent to around £60 million, that exhibit clear signs of fraud, however, after decades of limited oversight, this appears to be just the tip of the iceberg.

The mechanics of the fraud are shockingly simple, as applicants enrol online in university courses, often never setting foot in a classroom, but triggering tuition and maintenance loan payments. Because finance applications and course registrations are largely taken on trust with virtually no in-person verification, fraudsters can game the system remotely. As a consequence, much of the scam centres around so-called franchised colleges, which are private institutions that offer degrees on behalf of accredited universities. These smaller colleges have become a weak link in the chain, often admitting candidates with minimal vetting and lower entry requirements, making it easy for opportunists to pose as students.

The registration process involves forged credentials and identities, with organised crime groups submitting applications using fake documents or duplicated addresses to meet eligibility checks. Many franchised colleges are also willing to admit individuals who speak little to no English, accepting dubious evidence of English proficiency, such as screenshots of online Duolingo language tests. Once registered, a large number of the fraudulent students then immediately quit their courses after receiving the first instalment of the maintenance loan, around £4,000, before re-enrolling in a new course the next year, repeating the process.

At the heart of this scandal is a structural weakness caused by the rise of franchise partnerships in higher education, with universities increasingly farming out courses to affiliated colleges. This system was designed to widen access and save costs by using off-site providers, yet this outsourcing has instead opened a dangerous back door to funding with near-zero oversight. Roughly two-thirds of franchised providers are not registered with the official regulator of the higher education sector, resulting in hundreds of colleges teaching degree courses with no scrutiny from the Department of Education. As a consequence, quality controls have been scant, with little accountability for whether students actually attend classes, leading to some franchised campuses having course completion rates of only 60%. However, there has been a vested interest in keeping this system in place, with the number of students enrolled at franchised providers almost tripling over the last four years. By 2022, these educational arrangements accounted for just 5% of all student loan borrowers, yet franchised courses made up over half of all detected student loan fraud by value. It is therefore not particularly surprising that one franchised college received £234 million in revenue in 2024, with profits increasing by 1,200% in the last three years.

Yet these are not the only beneficiaries, as the franchising universities and partner colleges split the tuition fees, with the lead university typically taking 30% for essentially brokering the deal. The franchisee college then keeps the majority of the remaining tuition fees and uses this to pay commissions to recruitment agents. These agents actively coach applicants on how to game the system, sometimes using social media to advertise, recruiting students with poor English skills, and promising that they can get paid just to enrol. The agents can also engage in commission sharing, with some offering existing students cash lump sums for each friend they bring into the course, with no limit on referrals​. This web of kickbacks and profit-sharing creates an incentive pyramid, where all parties make money by pushing more students through the door, leaving the UK taxpayer footing the bill, as loans taken out fraudulently are never repaid.

Unfortunately, this state of affairs was inevitable, and while the fraud has now come to light, the stage was set by years of oversight that failed to keep pace with the growth of the higher education sector. The UK’s student finance model has long relied on an assumption of trust, even as funding shifted costs from the state to students and fees continued to rise. Education providers suddenly stood to receive much more per student, yet even as the loan books swelled, controls remained lax. A 2018 report warned that some private colleges had found a loophole within the funding system, and it was expected that the newly formed Office for Students (OFS) regulator would address the problem. However, in the years since, the OFS has been more focused on political battles in academia than on financial policing, meaning that little was done to systematically fortify the loan system against this new type of fraud.

Instead of preventing this fraud, government policies inadvertently widened the exposure, as in the wake of Brexit, EU nationals already living in Britain by 2020 retained the right to UK student finance as home students. Despite this being intended as a fair provision for those settled in the country, it also meant that tens of thousands of people from across Europe suddenly qualified for British loans with minimal oversight. Furthermore, after it was mandated that tuition fees would be frozen at £9,250, universities’ per-student income stagnated while operating costs continued to rise. To combat this, institutions sought creative ways to boost enrolment and revenues, driving mass adoption of the franchise system. Many also lowered academic standards and prioritised quantity over quality in their pursuit of tuition income. As a consequence, the continued failure of successive governments has helped to create a system ripe for plunder, resulting in a cash-rich, oversight-poor student finance scheme that has attracted the attention of criminal entities.

After years of widespread fraud, policymakers are now scrambling to close the cracks in the system, with new legislation in the pipeline and tougher enforcement measures on organised fraud. In addition to a dedicated counter-fraud team from the Public Sector Fraud Authority leading the investigation, the government announced that any college teaching 300 or more students on franchised courses must register with the regulator or lose access to student finance. There are also proposals to give the regulator the authority to impose instant sanctions on dubious providers, improve verification of student eligibility, and the power to recover funds from universities that turn a blind eye to fraud. The Department for Education is also exploring linking loan disbursements more closely to actual attendance and academic progress, while strengthening data sharing between agencies to identify duplicate or fraudulent students.

However, beyond these immediate planned fixes, the scandal has done near-irreparable damage to public trust in the higher education system. If degree programs can be abused on this scale, it raises uncomfortable questions about how much of the education sector has been operating on an honour system too easily dishonoured. This could rightly fuel a perception that British credentials aren’t what they used to be, with the perceived value of a university education diminishing with every sham course and low-quality provider. This crisis demands a change in mindset from policymakers, and restoring credibility will require more than just one-off raids or headline-grabbing investigations. Student finance should be a system that supports genuine academic aspirations and helps to facilitate a thriving higher education sector, without allowing organised fraudsters to exploit another British institution.