Providers delivering franchised higher education courses face tough new rules in a bid to curb student loan fraud and “rogue operators”.
The Department for Education has unveiled plans to “crack down on rogue operators” by bringing providers delivering franchised HE into the scope of the Office for Students (OfS).
Under the proposed changes, delivery partners that teach 300 or more franchised students will be required to register with the OfS for their courses to remain eligible for student finance. DfE said the move will tackle misuse of public funding and improve regulatory oversight of franchised HE, which has seen rapid expansion in recent years.
The move could require “hundreds” of new registrations to the HE regulator, which one provider representative body said would need “substantial extra resource and a dramatic reprioritisation of efforts”.
It follows an investigation by the National Audit Office which found a lack of oversight over franchised HE cost the taxpayer £2 million in fraud in 2022/23.
The number of students studying at franchised providers more than doubled between 2018/19 and 2022/23, increasing from 50,430 to 135,850.
DfE said over half of 341 franchised institutions are currently not registered with the OfS. “In some cases, students are offered poor-quality courses that fail to justify their cost, showing a clear need for reform,” the department said.
Fraud and quality
Education secretary Bridget Phillipson said her proposed reforms to HE regulation would “ensure students can trust the quality of their courses, no matter where or how they choose to study”.
“We are committed to cracking down on rogue operators who misuse public money and damage the reputation of our world-class universities,” she added.
A recent NAO report found £2.2 million of the £4.1 million in detected student finance fraud in 2022/23 related to franchised provision. Yet, only 6.5 per cent of student loan funded students are on franchised courses.
Additionally, OfS data suggests student outcomes at some franchised providers are significantly lower than those at directly regulated providers.
Franchised providers will be subject to greater student attendance and financial monitoring, as well as scrutiny of recruitment practices – all things DfE has flagged as concerns in the franchised sector.
Alex Proudfood, chief executive of Independent Higher Education (IHE), said he supports “the principle of universal regulation that is proportionate, flexible and efficient”.
“Sadly these are not words that anyone who has undergone the registration process in the past seven years would use to describe it.”
Mandatory registration
Unregistered providers would only be required to register with the OfS if they have over 300 franchised students, excluding apprentices. Those with fewer than 300 will remain accountable to the franchising university or college. Students funded through student finance, self-funded students and international students all contribute towards the 300 threshold.
OfS registration would require providers to evidence they had met quality and governance requirements, were financially secure and were held to account for student outcomes.
DfE estimates that the 300 threshold would capture around 83 per cent of students currently at unregistered franchise providers.
The consultation sets out some exemptions to the new registration rules. Further education colleges, sixth form colleges and designated institutions will be exempt from the registration requirement as they are already subject to ESFA and managing public money regulations.
Simon Ashworth, deputy CEO at the Association of Employment and Learning Providers, thinks independent training providers should also be exempt.
“This creates an uneven playing field for ITPs who are already approved by DfE and directly inspected by Ofsted. This is already more than enough to evidence robustness – and we believe should also entitle providers to an exemption.
“If the DfE wants to properly review franchising arrangements, we would urge them to lift the lid on some of the disproportionate fees and charges imposed on franchisees.”
The OfS register is currently closed to new applications. The regulator shut its register and paused applications for new degree awarding powers in December while it prioritises university financial health. That freeze is expected to come to end this August at the latest.
Regulate for growth
Proudfoot questions whether the OfS will have the resource to register what could be hundreds of new providers following a backlog off the back of the current freeze. This would come on top of “many years of unacceptable performance, opaque decision making and the absence of reliable service standards”.
He said: “In 2024, the OfS registered just 7 providers, despite rising demand and a backlog of applications, so it is obvious that any requirement to register what could be hundreds of additional providers within a two-year period must be accompanied by substantial extra resource and a dramatic reprioritisation of effort towards this core statutory function.
“More than that, to get this job done will require a cultural step change within the regulator itself and a leadership who genuinely understands the importance of growth, innovation and investment in the higher education sector.
“It’s time for the OfS to meet the challenge set so clearly by the prime minister and chancellor of the exchequer this week and start regulating for growth, not just for risk.”
Depending on the outcome of the consultation, the new registration rules could be introduced in April next year. Decisions about course eligibility for student loans would then be made in September 2027 for implementation in the 2028/29 academic year.
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