The statistic was among several damning findings reported in the NAO’s report, published today, on its investigation into state support for students at private higher education colleges.
Margaret Hodge, the Labour MP who chairs the House of Commons Public Accounts Committee, which will hold a hearing into the report, said the NAO investigation “has exposed the potential misuse of millions of pounds of public money”.
The NAO was asked in May to investigate concerns about possible abuse of the student loans system by for-profit providers, following a 33-fold increase in the amount of public money paid out to students at such colleges since the coalition government came to power.
The NAO found that the average dropout rate for students at private providers accessing student support was 12 per cent in 2012-13. The average for students at institutions funded by the Higher Education Funding Council for England was 4 per cent.
The number of for-profits with dropout rates above 20 per cent rose to nine in 2012-13, compared with just three in 2011-12.
The report says for-profits’ higher dropout rates may be explained by their recruitment of a higher proportion of older or poorer students. But the rates “may also reflect the capability and motivation of the students, the quality of the education and support provided, or inappropriate recruitment by the provider”.
It notes that neither the Department for Business, Innovation and Skills nor any of its “oversight bodies” has defined “what might constitute an acceptable dropout rate for providers that benefit from tuition fee loans”.
The report also confirms that European Union students at some alternative providers have claimed student support they were not entitled to.
It notes that between September 2013 and May 2014, BIS and the Student Loans Company investigated whether 11,191 EU students applying for maintenance support met residency requirements. Of the 5,548 who failed to demonstrate eligibility, 83 per cent were applying to just 16 alternative providers.
Nearly 1,000 ineligible students had received £5.4 million before payments were suspended at the end of October.
Between 2012 and 2014, BIS also suspended payments to seven providers and their students over concerns that students were enrolled on courses that were not approved for student support.
One provider – Guildhall College – had all of its course approvals revoked after it was discovered that it had accessed support for unapproved courses, and BIS “has taken steps to recover overpayments from two further providers where it concluded issues were substantiated” (London Empire Academy and ICE Academy).
However, the report also identifies a “lack of clarity” about which courses were approved for student support. A number of different lists were in circulation and BIS did not draw up a master list until September.
Meanwhile, 20 per cent of publicly-funded students on Higher National courses at alternative providers may not have been registered with the qualification awarding body in 2012-13, meaning they would be unable to attain the qualification, the report finds.
“The SLC does not have powers to check that providers have registered students with an awarding body before making student support payments. No work has been undertaken by the oversight bodies into why there is this apparent discrepancy,” the report says.
The report also notes three cases where BIS suspended payments due to concerns that providers had supplied incorrect information about student attendance.
Ms Hodge said the “extraordinary rate of expansion, high dropout rates, and warnings from within the sector ought to have set alarm bells ringing” about the alternative providers.
“Today’s NAO investigation has exposed the potential misuse of millions of pounds of public money, with EU students at some private colleges accessing public funds to which they were not entitled,” she said.
“It is incredible that 992 students from the EU who were not eligible for publicly-funded support received a huge £5.4 million from the Student Loans Company before payments to them were suspended.
“The department went ahead with its reforms to expand the role of private colleges without ensuring there were controls in place to ensure that taxpayers’ money was used for its intended purpose of supporting higher education and not for private gain.”
She added that her committee would hear evidence from officials from BIS, the SLC and Hefce on 15 December following the report.
A BIS spokesman said alternative providers gave “a wider choice of higher education to students”.
“It is important that the high quality of our higher education system is sustained and the government has taken a number of steps to improve the regulation of alternative providers,” he said.
“We will continue to investigate and take robust action against any provider failing to meet the high standards expected of them.”
Birth pains: Times Higher Education’s coverage of ‘alternative’ providers
As universities minister, David Willetts memorably predicted that “letting new providers into the system” would be “the rising tide that lifts all boats”.
Since that statement, at a Universities UK conference in 2011, Times Higher Education has reported on a long list of difficulties associated with the increasing role of private, and in particular for-profit, providers.
- Our reporting of the role played by private providers in UK higher education started long before Mr Willetts’ speech at the Universities UK conference, and included a detailed analysis in 2010 following the decision to award for-profit BPP with university college status.
- In 2011, we reported on the unusual focus of some of the colleges being designated for access to Student Loans Company funding, including Norland College, which trains “Norland nannies” and has been described as “the world’s most upper-crust nursery training school”.
- Also in 2011, we revealed that private colleges providing degrees in subjects ranging from law and finance to bible studies and acupuncture had received more than £25 million via taxpayer-subsidised student loans since top-up fees were introduced.
- The following year, in 2012, we reported on the Quality Assurance Agency’s admission that it had no knowledge of the teaching quality at two-thirds of the private institutions benefiting from state-backed loans funding.
- This was followed by the revelation that students on private college courses such as animal chiropractic care and “contemporary person-centred psychotherapy” had been eligible to receive state-subsidised funding for the past two years, with one private institution being given state loan access for nearly 100 sub-degree vocational courses in a single day.
- Earlier this year, we reported on SLC data showing that two for-profit colleges, GSM London and St Patrick’s International College, received more mainstream public funding for their teaching than the London School of Economics as part of a state-backed bill for private higher education that had reached £0 million.
- In another exclusive, we reported that the for-profit college with the fastest growth in income from taxpayer-funded students was owned by a holding company in the Netherlands, a structure that some companies have used for tax advantages.
- And in October, we ran an in-depth investigation into one private London institution, Regent College, as a case study to explore the way that the government’s reforms were being used on the ground.