A new higher education think tank has called on the government to replicate its crackdown on subcontracting in further education to address a “franchising crisis” in universities.
The Post-18 Project, launched in May promising “practical ideas, helpful research and big thoughts” on post-18 education, set out an aggresive package of regulatory reforms it says could be implemented “within months” to stop fraud, protect students and avoid a repeat of the scandals that plagued the FE sector in the 2010s.
Its report, titled The Cashpoint Campus Comeback, warns that over 200,000 students are estimated to enrol through franchised arrangements by the time the government’s current reforms kick in in 2028.
Over this “leisurely timeline”, over £2 billion “will flow to unregistered providers” and losses worth “hundreds of millions” in loans going to students who don’t complete their courses.
The report authors accuse the Department for Education of “institutional amnesia” and challenges it to immediately adapt reforms introduced in the FE sector for adult education and apprenticeships subcontracting in 2020. Those reforms, including caps on volumes, geographic restrictions and enhanced oversight and transparency requirements, are credited with cutting out poor-quality provision in FE.
Mark Leach, chair of the Post-18 Project and editor-in-chief of Wonkhe, said: “This is not the DfE’s first fraud rodeo. While the overlap with FE franchising problems is not total, the actions taken by ESFA provide a number of off-the-peg solutions to facets of the current crisis.”
Franchising in higher education allows universities to subcontract the delivery of courses to private providers. But unregistered providers and underdeveloped oversight by universities has led to fraudulent claims on tuition fee and student maintenance loans.
The DfE unveiled plans to “crack down on rogue operators” in January following a damning investigation by the National Audit Office that 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.
DfE’s reform package includes mandatory Office for Students (OfS) registration and oversight for providers with franchised volumes over 300 students or more from the 2028-29 academic year. A consultation on its proposals closed in April and DfE is currently analysing responses.
Leach’s report describes the timeline as “inexcusable” and the 300 threshold as “too high”.
“A provider teaching 250 students at a 66 per cent continuation rate still represents 85 failed students annually. FE learned this lesson – even smaller providers can cause significant damage when operating at scale across multiple partnerships,” the report said.
DfE’s proposals are “regulatory negligence” and make “no operational sense” given the scale of the problem.
Instead, The Post-18 Project demands a freeze on new franchising partnerships for more than 50 students, immediate OfS investigations into existing partnerships with continuation rates of below 70 per cent, emergency intervention powers for cases of suspected fraud and a universal monthly data submission on student recruitment, attendance and early progression indicators. And agencies that are paid commissions to recruit students should be banned.
University governing bodies should approve and review franchise arrangements against a strict “education rationale” which should replicate the ESFA’s “one hour by car” rule as a measure to limit geographical reach.
The report states: “The proliferation of London-based providers serving students registered at universities hundreds of miles away makes a mockery of place-based education. Prior approval for distant provision – already operational in FE – would end the fiction that educational oversight can be effectively maintained from Canterbury to Canary Wharf.”
It also recommends franchised provision is capped initially at 25 per cent of a university’s total student numbers, reduced to 15 per cent by 2029, mirroring the 25 per cent cap in place for FE subcontracting.
The report concludes: “The evidence is overwhelming – franchise abuses in higher education mirror those previously seen in further education. The solutions are proven – ESFA’s reforms successfully addressed identical problems. The only question is whether we will apply these lessons – enhanced by implementation experience – or repeat history.
“The tools exist, the evidence compels, and the solutions await.”
A Department for Education spokesperson said: “Any misuse of student loans is an insult to hard-working students striving for better opportunities as well as taxpayers, and we have already taken action to cut off funding to providers where there are concerns about abuses of public money.
“Our Plan for Change will restore trust in our Higher Education sector. The Public Sector Fraud Authority is coordinating a cross-government response, a series of investigations are already underway, and the Office for Students is clamping down on franchising.
“Where misuse or fraud is found we have powers to claw back payments – and we won’t hesitate to use them.
“We will bring in tough new laws to ensure the OfS can quickly stop bad actors gaming the system once and for all.”
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