DfE confirms crackdown on HE franchise fraud

Providers delivering higher education courses under franchised arrangements face stricter rules to crack down on students being treated as a “route to fast cash”, the government has confirmed.

Following a consultation, the Department for Education has decided to carry out plans to force providers delivering franchised higher education to 300 or more students to register with the Office for Students (OfS) for their courses to be eligible for student finance.

Yet four in 10 (40 per cent) organisations consulted on the proposals fear that providers will choose to stay below the 300-student threshold to avoid the requirement to register.

DfE launched its proposals in January this year in a bid to boost regulatory oversight of franchised higher education, which has seen rapid expansion in recent years.

The number of students studying at a franchised provider nearly tripled between 2019-20 and 2023-24, from 56,590 to 159,460, representing 5 per cent of all higher education students.

DfE has calculated nearly 100,000 students were studying at a franchised provider that was not registered with the OfS.

The department said rapid growth in franchised courses has led to “serious concerns about poor-quality provision, financial exploitation, and fraudulent practices among some franchise providers”. 

New rules stipulate unregistered providers with 300 or more students will have to apply for OfS registration for their courses to be eligible for student finance for new students in 2028-29.

DfE also confirmed it will keep the 300-threshold open to review and could lower the limit if there is “evidence of poor behaviour or other significant risks to public funds”.

Out of 53 consultation responses, most of which were from universities, 87 per cent of respondents agreed with the introduction of a student number threshold, and 57 per cent agreed the threshold should be set at 300.

The government did receive concerns from consultation participants on OfS capacity, additional bureaucracy, gaming, access and participation, providers’ capacity and financial sustainability.

Multiple provider types will be exempt from registration, DfE confirmed. These include: FE colleges, sixth form colleges, state schools, NHS providers, mayoral combined authorities, police and crime commissioners, local authorities, government departments, and the armed forces.

Timeline

Ministers expect to update the Education (Student Support) Regulations 2011 law with its franchising amendments in April, with the new rules coming into force from May 2026. 

Unregistered providers will have until June 30, 2026 to submit their applications to the OfS.

DfE will determine eligibility in September 2027 on whether courses delivered by the franchised providers will be designated for student finance in 2028-29. These will be based on student numbers in 2025-26, recorded in the Higher Education Statistics Agency (HESA) and individual learner record (ILR) data.

DfE will publish an annual list of franchised providers whose courses are eligible for student finance to allow students to make “informed decisions”.

Registered providers are also required to sign up to the Office of the Independent Adjudicator, which investigates higher education student complaints.

The government said it is working “closely” with the OfS, which is expected to publish the outcome of its own consultation next Spring on new requirements for the oversight of subcontractual arrangements in English higher education.

A spokesperson added that ministers will also legislate, when parliamentary time allows, to give the OfS “stronger powers to act quickly where quality is compromised or public money is at risk, ensuring problems in franchised provision can be dealt with more rapidly in future”. 

Education secretary Bridget Phillipson said the changes come as too many rogue operators are treating students as a “route to fast cash” rather than people investing in their future.

“Those days are over. If you use public money, you will be held accountable and face proper scrutiny.”

Vivienne Stern, chief executive of Universities UK, said: “It is vital that franchise provision is underpinned by high and robust standards and we support this step, which will help to protect the higher education sector’s world-renowned reputation for quality.

“UUK’s members have been taking extensive actions to tighten controls, and we have long championed the introduction of measures requiring franchise partners to register with the OfS.”