The Department for Business, Innovation and Skills organised an inspection of the London School of Science and Technology, whose main base is in Wembley, north London, in June following allegations in The Guardian.
However, the department has now decided that there was no evidence of fraud or serious malpractice.
BIS has granted designation to courses at the college for 2014-15, meaning its students will be eligible to claim funding from the public-backed Student Loans Company for 67 sub-degree Higher Nationals qualifications.
Designation has also been granted to the college for two year-long sections of degree programmes, awarded by the University of West London.
The designations cover all of the college’s campuses – in Wembley, Hounslow and Luton.
However, it is understood that BIS will place LSST on a six-month probationary period in relation to the management of attendance.
The Guardian alleged in May that classrooms at the college’s Wembley base were empty despite it having 1,500 students, many of them claiming support from the public-backed SLC, and that the college offered places to students without the required skills.
LSST issued a statement to The Guardian denying the allegations in the newspaper, saying its admissions procedures were “undoubtedly robust”.
The Quality Assurance Agency also mounted a full investigation under its “concerns” scheme. The agency said the report would be published “in due course”.
All private providers with designation have been obliged to reapply if they wish to renew designation for 2014-15.
A BIS spokesman said: “Students deserve the best quality education. We will fail providers if they do not meet the high standards expected of them.
“LSST were subject to the same rigorous designation process as any other provider for the 2014-15 academic year. All providers are subject to annual monitoring so that they continue to meet the strict conditions of designation.”
It is understood BIS found there was no evidence that students did not have the English skills to complete their HN courses. It also found that students were on site on the date the Guardian reporter attended, or were undertaking and submitting assignments.
But the department did find that levels of attendance were low when compared with LSST’s own policy.