PAC: "Chancer's Charter" persists in alternative higher education sector

REPORT SUMMARY

Serious allegations of fraudulent practices at alternative providers show that the Department for Education has not done enough to close down opportunities to play the system, allowing the sector to become a ‘chancer’s charter’. 

Since the Committee previously reported in 2015, the Department has made some progress in strengthening its oversight of alternative providers. Fewer students are dropping out of their courses, and the Department has strengthened controls and committed more resources to tackling fraud.

However, one in four students at alternative providers are still not completing their courses, compared to one in ten in the rest of the higher education sector, and a further £10 million has been paid out to students or providers who are not eligible for student loan funding.

We expect the new Office for Students to learn the lessons from the Department’s experience to date when it takes over responsibility for the alternative provider sector.

COMMENT FROM PAC CHAIR MEG HILLIER MP

“The new Office for Students has already faced intense scrutiny for a controversial board appointment but more ingrained challenges await.

“From next month it assumes responsibility for regulating an alternative HE sector tainted by allegations of fraud and with a non-continuation rate more than twice that found in the rest of higher education.

“This deprives students of vital skills and, potentially, the public purse of money loaned to pay for their studies. Sanctions for providers have had some effect but this blunt-instrument approach only goes so far. New thinking is required.

“Inadequate data continues to hamper oversight and efforts to withhold loans from ineligible students. The Department for Education and Student Loans Company, together with the OfS, must raise their game here.

“The OfS was established with an explicit commitment to put the interests of students at the heart of its work. This is commendable but honouring that commitment will be more challenging than making it.

“Bad apples must be cast out and as a priority we urge the OfS to assert its authority and detail exactly how it will tackle the fraud and malpractice that continues to blight the alternative sector.”

CONCLUSIONS AND RECOMMENDATIONS

There are still too many students dropping out of their courses. High numbers of students dropping out of their courses is a concern, not only because they will not gain the skills they need, but also because they may not repay the public money borrowed to fund their studies. Since the Committee reported in 2015, the Department has imposed tougher sanctions on providers, and non-continuation rates (the rate of students who do not return for a second year of study) have reduced from 38% in 2012/13 to 25% in 2014/15. However, rates in the rest of the sector are much lower at 10%. To date, when imposing sanctions the Department has primarily focused on each provider’s performance against its individual benchmark, rather than a target non-continuation rate for the sector as a whole. The provider’s individual benchmark takes account of the particular characteristics of the provider’s student population, such as students’ age and entry qualifications. However, in taking this approach, the Department is failing to require providers with high numbers of students from disadvantaged or less traditional academic backgrounds, to tackle the underlying reasons why their students drop out.

Recommendation: The Office for Students should set out what more, beyond the existing approach to imposing sanctions, it will do to ensure that non-continuation rates reduce further year on year, and confirm by when it expects to reduce non-continuation rates for alternative providers to the same level as for the rest of the HE sector.

It remains to be seen how, in practice, the OfS will put protecting and promoting, students’ interests at the centre of its regulatory system. The new OfS states that it aims to put students at the centre of its new framework for regulating the higher education sector. It intends to draw on data such as that provided by the National Student Survey to ensure it is capturing the student perspective. In addition, it intends to have a student representative on the Board but, as at January 2018, Ministers had made only an interim appointment. Students are vulnerable to changes in their providers’ circumstances. For example, the Department decided that the London College of Creative Media should continue to be eligible for student loan funding in 2017, even though it knew the College was experiencing financial difficulties. The Department agreed a contingency plan with the College’s validating body, designed to protect students, but the College entered administration in January 2018. 

Recommendation: As the OfS develops, we will be looking to see it demonstrate that protecting student interests is indeed central to its approach, effective representation for students on the Board, mechanisms for consulting students, and raising standards for students across the whole HE sector, irrespective of whether they study at traditional or alternative HE institutions. The OfS should set out a clear strategy, with timescales, on how it will promote student interests.

Despite previous assurances to us, the Department is taking far too long to get sufficiently timely data to allow robust oversight of providers. It has also failed to recover student loan payments it made to ineligible students. The previous Committee’s 2015 report highlighted the lack of adequate performance data. In response, the Department for Business, Innovation & Skills, who were then responsible, committed to improving data collection and analysis. However, effective monitoring systems will now not be in place until 2019/20. The Department’s current non-automated approach relies on end-of-year non-continuation data as the basis for sanctions, which means that, depending on when a student stopped attending, data may not be available for more than a year after the student dropped out. In addition, while the Student Loans Company (SLC) has introduced digital forms to help avoid making payments to ineligible students, it paid out a further £10 million to ineligible students in 2014/15 and 2015/16, and admits that it still lacks robust data to monitor and analyse levels of ineligible payments in real time. Although the SLC previously committed to recovering all money that had been made to ineligible students, it has only been able to recover £11 million of the £45 million of ineligible payments made in the six years to 2015/16.  

Recommendation: By September 2018, the Department, the SLC and the OfS should develop a more ambitious plan for what data they will collect to monitor provider performance and to avoid further ineligible payments. This plan should set out how they will collect data including the development of better data systems akin to those used in other parts of government and in the private sector.

The Department does not yet have sufficiently effective systems in place to identify promptly where it needs to intervene to address fraud or emerging issues. Since 2014, the Department has committed additional resources to oversight of the alternative provider sector. The Department has established an intelligence unit and the SLC has invested in counter-fraud capability. However, the Department is overly-reliant on whistleblowers with 50% of its investigations prompted by informers, including providers’ students and employees. A better system would make more use of real-time data and would bring together different datasets to detect patterns, such as a correlation between high non-continuation rates, indicators of poor quality provision and low student satisfaction. The OfS has a key role to play in developing more sophisticated indicators for monitoring the sector.

Recommendation: By the end of 2018, the Department and the OfS should develop a more systematic and proactive approach to identifying problems emerging in the sector so that it can take prompt action to deal with failing providers and protect the interests of learners. 

The alternative provider sector still presents too many opportunities to fraudsters. From January 2015 to November 2016, the Department investigated 32 cases of potential wrongdoing at alternative providers. More recently, in November 2017 the BBC’s Panorama programme broadcast details of an undercover investigation and reported that agents at a small number of alternative providers were helping students make fraudulent applications, offering coursework for sale, and faking attendance so that they could claim loans they were not entitled to. In addition, the Department lacks information on the transparency of arrangements between alternative providers and the higher education institutions that validate their degrees, including the level of payments made by alternative providers to their validating institutions and the role played by validating institutions in ensuring quality.

Recommendation: As one of its first tasks, the OfS should set out how it will investigate and clamp down on recruitment malpractice, faking attendance records and coursework, and opaque arrangements for validating degrees, and produce a robust plan for remedying these problems across the sector.