Regulatory failure is letting ways to widen access get a bad name

Last week the Financial Times published an investigation into the “surge” in students taking foundation years.

FOI data showed that at the four largest providers, 51 per cent of foundation year graduates received a 2:2 or lower – compared with 36 per cent among students who entered directly onto Year 1 of the same degree at the same lead university.

HEPI director Nick Hillman was quoted arguing that this was all “valuable information” that needs to be “widely understood” among school leavers. HEPI’s Josh Freeman said similar things in 2024 in Cracks in our foundations, which used a Department for Education (DfE) report to show that entrants had risen from 8,470 in 2011–12 to 69,325 in 2021–22, that 51 per cent of entrants were studying business and management, and 73 per cent were studying at providers categorised by the Office for Students (OfS) as “low or unknown tariff.”

But not all foundation years are the same. Some serve an important function, preparing students with non-traditional backgrounds for demanding specialist programmes.

DfE’s own analysis showed that completion rates at specialist and high-tariff providers were substantially higher than at low-tariff generalist ones. Both it and HEPI didn’t look at who was doing the delivery.

Separately, a whole flurry of articles have been worrying about entry qualifications. This one headlined with “one in ten new university students do not have a single A-level,” and this one points out that 25.2 per cent of HE students without Level 3 qualifications failed to complete their course.

They quote sector leaders and policy figures expressing concern about whether these students are being set up to succeed, and whether the support structures exist to help them.

Again, there’s something real here. But not all no-qual students are at the same sort of providers on the same sort of courses. Many students enter through recognised vocational routes, access courses, or professional experience – and go on to succeed.

What the articles miss is who’s been growing their activity. OfS’ Insight brief 22 showed that 55.3 per cent of full-time undergraduates studying through subcontractual arrangements had no, unknown or “other” entry qualifications, compared with just 9.0 per cent across the sector as a whole.

Then on Friday, PoliticsHome reported that an estimated 22,000 students at around 15 (lead) providers were studying “full-time” courses delivered on weekends.

The piece quoted several MPs and policy commentators raising concerns about value for money and the accuracy of data submitted to the Student Loans Company (SLC). The implication of the coverage was that flexible delivery is somehow inherently suspect.

That framing too is misleading. Plenty of providers deliver high-quality HE in compressed, intensive or flexible formats. It only mentions in passing that the students covered are mainly on franchised courses.

But what if all three stories are really about the same thing? As we noted in early 2024, the foundation year debate and the subcontracting debate are the same debate – they just happen to be covered by different journalists and discussed in different policy silos.

When you triangulate the data across all three angles, a pattern emerges. The weaker outcomes aren’t evenly distributed across course types, student groups, or delivery patterns. In our analysis, they are heavily concentrated in for-profit non-specialist (mainly franchised) provision.

How it grew

The number of students taught through subcontractual arrangements doubled between 2019–20 and 2022–23 to over 138,000, and is still growing.

62 per cent of students were studying business and management courses. There were 110 registered lead providers with around 365 delivery partners, of which just under a third were themselves registered with OfS.

But those sector-wide headlines obscure where the growth has actually been concentrated. The growth has been concentrated in a small number of for-profit providers, almost all of them in London and a handful of other English cities, almost all of them recruiting students with no or unknown prior qualifications onto integrated foundation year programmes.

OfS data shows that full-time undergraduate entrants to degrees with integrated foundation years grew from 63,400 in 2020–21 to 96,040 in 2023–24 – a rise of 32,640, or 51 per cent, in three years. This aligns closely with the FT’s figure of “nearly 95,000” for 2024–25.

Approximately 13,400 – 41 per cent – were in franchised provision, students registered at a university but taught by a for-profit delivery partner. The franchised foundation year growth is heavily concentrated: a small number of delivery partners, working across multiple lead universities, account for the overwhelming majority of the increase.

Among the largest operators in this segment, individual delivery partners grew from near-zero to several thousand entrants in three years. Several others appeared from nothing during this period, collectively adding thousands more.

Another 39 per cent were at for-profit providers teaching their own registered students. Among the largest, individual providers added several thousand foundation year entrants over three years.

Just 20 per cent were at conventional universities teaching directly on their own campuses. That growth is spread thinly across dozens of institutions, with no single university adding more than a few hundred directly-taught foundation year students.

The providers at the centre of recent foundation year coverage – those with the largest headline foundation year numbers – are growing almost entirely through their franchise operations, not through their own teaching.

No-qualification growth

The pattern with students holding no or unknown qualifications is near-identical. Across the sector, entrants with no qualifications grew from 48,800 to 78,460 between 2020–21 and 2023–24 – an increase of 29,660.

Using OfS’s size and shape data, we’ve identified a group of large for-profit delivery partners and provider groups that between them account for approximately 89 per cent of that growth – 26,290 of the 29,660.

Over three years, the same small group of delivery partners that dominate the foundation year growth also dominate the no-qual figures. Among the largest, individual operators grew from near-zero to several thousand no-qual entrants each.

Several others appeared from nothing with almost their entire intake holding no qualifications – in some cases 97 or 98 per cent.

At the lead provider end, several universities have seen their no-qual proportions transform dramatically over three years, with some now recording 60 to 80 per cent of their full-time undergraduate entrants as holding no qualifications.

Meanwhile, FT undergraduate entrants at delivery partners grew by approximately 30,400 between 2020–21 and 2023–24. The same small group of for-profit delivery partners that dominate the foundation year and no-qual growth account for 90 per cent of that total.

The remainder 10 per cent is spread across approximately 100 other delivery partners – further education (FE) colleges, performing arts schools, National Health Service (NHS) trusts, specialist providers – whose combined entrant numbers have been broadly flat.

Meanwhile, new for-profit delivery partners continue to enter the market. At least five brand-new names appeared in the 2023–24 data with no prior history, collectively enrolling over 3,500 students between them. None has any outcomes data.

By the time OfS’s data infrastructure registers their existence, they’ll already have recruited cohorts and triggered loan payments. If the wider subsector pattern continues, some may later show the weaker continuation and progression rates seen elsewhere in this part of the market.

Same students, same story

These aren’t three separate trends. Foundation year growth, no-qual growth, and franchise growth overlap almost entirely – the growth is being driven by the same small group of for-profit delivery partners, recruiting the same kinds of students, onto the same kinds of courses, through the same kinds of arrangements.

Using OfS’s size and shape data, we’ve identified a group of large for-profit delivery partners and provider groups that between them accounted for approximately 79,000 full-time undergraduate entrants in 2023-24.

93 per cent are mature students, and 58 per cent aged 31 or over (it’s 30 per cent sector-wide). Some 97.5 per cent are eligible for student loan funding. 59 per cent are studying locally, compared with 28 per cent sector-wide. 67 per cent are studying business and management, and 48 per cent are from the two most deprived quintiles.

These aren’t school leavers wavering between university and a gap year, as commentary often implies. They’re working-age adults, more likely than the sector average to come from disadvantaged backgrounds, and more likely to be drawn from communities in which English is not the first language, recruited locally onto business courses delivered by for-profit companies.

OfS’s Insight brief noted that 65 per cent of SLC applicants on subcontracted courses were from nationalities where English isn’t the first language – UK-resident, but from communities where the availability of maintenance loan support may be a significant factor in the decision to enrol.

At some delivery partners the overlap between foundation year provision and no-qualification entry is total or near-total, with several recording 94 to 100 per cent of students on foundation years and similarly high proportions holding no qualifications. Among the providers with the highest no-qual concentrations, continuation rates have in some cases fallen sharply over four years.

At the registering provider end, several post-92 universities now have more students subcontracted out than they teach directly – in some cases, 80 per cent or more of their students are at delivery partners.

When a university is directly teaching fewer than one in five of its own students, it is reasonable to ask whether its primary function has become registration and quality assurance rather than teaching.

What the data says

We’ve aggregated partnership student outcomes data across this group of for-profit providers, and compared them with the approximately 100 other delivery partners and with the sector average for all providers.

The results are, comparatively at least, poor. Across this group, the combined continuation rate for the most recent cohort was 77.7 per cent, below the OfS minimum of 80 per cent. Completion was 68.6 per cent, below the 75 per cent threshold. And the combined progression rate was 50.9 per cent, below the 60 per cent threshold.

In every case, the group performed significantly worse than both the approximately 100 other delivery partners and the sector average for all providers. The non-profit and specialist providers broadly meet or approach OfS thresholds. The data suggests the weaker outcomes are not a feature of subcontracting as such – they are concentrated specifically in for-profit subcontracting in generalist subjects.

Several of the largest providers have seen continuation and progression rates deteriorate over the four-year period for which data is available, with continuation drops of more than 30 percentage points and progression rates below 40 per cent at some providers.

Several providers are too new to have any outcomes data whatsoever – by the time the data catches up with their volumes, the students will already have been recruited, enrolled and, in many cases, dropped out.

Outcomes by provider/group

Continuation: proportion continuing after one year and 15 days (OfS threshold 80 per cent). Completion: proportion completing or continuing after four years and 15 days (OfS threshold 75 per cent). Progression: proportion in managerial/professional employment or further study 15 months after qualifying (OfS threshold 60 per cent). “Recent” is the most recent single-year cohort (Year 4). “4-year” is the four-year aggregate. Figures in red are below the relevant OfS threshold.

Sources: OfS student outcomes data (B3 indicators), 2025 release; OfS partnership student outcomes data; OfS size and shape of provision data. The grouping of providers used in this table is illustrative and based on our analysis of OfS size and shape data; it is not exhaustive. “All other delivery partners” is calculated by subtracting the selected group of for-profit operators used in our analysis and a small number of other for-profit operators (including international pathway providers) from the total partnership student outcomes dataset. Some providers appear as both registered providers and delivery partners; where this is the case, data is drawn from whichever OfS release covers their primary mode of operation. The “other for-profit” category aggregates a small number of international pathway providers and similar operators whose business models and outcomes profiles are distinct from the main group. Continuation and completion columns refer to entrant cohorts; progression columns refer to graduation cohorts. “Recent” refers to the most recent single-year cohort available in the data (Year 4 of the reporting window). “4-year” refers to the four-year aggregate indicator. Partnership delivery FY (≥58 per cent) 10 of the delivery partners in our analysis group have at least one suppressed FY value in the size and shape partnerships data, so the true figure is higher than 58 per cent. The no-qual figure (≥72 per cent) is more reliable – only 2 suppressed.

Signals in the loan system

There are other ways to triangulate the data. In a normal year, the number of maintenance loan borrowers should be roughly equal to or slightly lower than the number of fee loan borrowers.

David Kernohan’s now annual analysis of SLC data shows a clear pattern where the number of maintenance borrowers significantly exceeds the number of fee loan borrowers at some providers. The gap may indicate early withdrawal or non-continuation patterns that warrant scrutiny, though the data does not by itself establish the reason.

The £190 million weekend delivery story is connected to this same financial architecture. Many of these for-profit providers and their agents market weekend or flexible delivery – and the student profile is overwhelmingly mature, locally-resident, and working, consistent with the 93 per cent mature student proportion across this subsector.

The availability of maintenance loan support for in-attendance courses appears to be one feature that may help explain the growth of weekend delivery models. And the genuine, ambitious students who received those maintenance loans – drawn from the same disadvantaged, mature, locally-recruited population – are now facing repayment demands for money they received in good faith and have long since spent.

Separately, the National Audit Office (NAO) has investigated fraud in the student loan system. OfS noted in Insight brief 22 that 53 per cent of the £4.1 million in SLC-detected fraud in 2022–23 arose in relation to students studying through subcontractual arrangements. The maintenance loan excess at individual providers is not proof of systematic fraud – but the concentration of detected fraud in subcontracted provision is a pattern that warrants serious scrutiny from regulators.

The HESES25 data collection illustrates the extent of franchise dependency at some lead providers. Several institutions that had appeared in previous years to be large, growing universities turned out to be teaching far fewer students directly than their headline numbers suggested.

At several lead providers, OfS-fundable FTUG entrant numbers fell dramatically once franchised-out students were separated – in some cases by 80 per cent or more.

But approximately 110,000 students were reclassified to “not OfS fundable,” reflecting a policy change of DfE impacting the distribution of what’s left of OfS funding.

Following the money

If the student outcomes data establishes that something is going wrong for students, and the SLC and HESES data suggest something is going wrong for taxpayers, what about the providers themselves? To answer that question, we looked again at the statutory accounts filed at Companies House for each of the for-profit delivery partners and provider groups in our analysis.

13 have filed accounts containing profit and loss data. A caveat on comparability – gross and operating margins derived from Companies House filings depend on how each entity classifies costs between cost of sales, operating expenses, and group charges. The figures are therefore only indicative of the financial characteristics of this subsector.

The selection of providers in this table is illustrative and based on our analysis of OfS size and shape data and Companies House filings; it is not exhaustive. One provider in this group is a registered charity; its income and surplus are drawn from its Statement of Financial Activities rather than a conventional P&L. Dividend payout ratios above 100 per cent indicate payments funded by drawing down reserves. Several providers file abbreviated accounts that do not disclose their P&L, despite collectively teaching several thousand full-time undergraduate students. Corporate ownership structures across this group include individual ownership, offshore holding companies, and leveraged corporate groups. Revenue is mainly derived from tuition fees ultimately funded by Student Loans Company payments.

The headline figures are striking. Thirteen for-profit providers with published accounts generated combined revenue of approximately £1.2 billion, profit after tax of approximately £250 million (a 21 per cent net margin) and paid dividends of approximately £118 million.

Gross profit margins range from 49 per cent to 82 per cent. At the upper end, if “cost of sales” in the accounts broadly corresponds to direct teaching costs, the implied spend on delivery is notably low.

Several paid dividends substantially exceeding their annual profit, drawing down accumulated reserves. In some cases, dividend payments are very large relative to annual income and profits – and relative to the entire annual income of many small universities.

The corporate structures vary widely. Several are owned by individuals. Others sit beneath offshore holding companies. At least one group services a significant leveraged loan. One is structured as a registered charity – though with substantial fee income, a large surplus retained in full, and no fundraising costs, the distinction from its for-profit neighbours in this table is largely formal.

At least one delivery partner in the group has generated substantial cumulative turnover while operating entirely outside the OfS registration system.

None of this is to allege fraud or deliberate wrongdoing by any individual provider. But the pattern of financial returns – when set against the student outcomes data and the concentration of public funding flowing through this subsector – raises serious questions about whether the current regulatory framework is adequate to protect the interests of students and taxpayers.

There are important things we don’t know. We can’t see foundation year outcomes specifically for students subcontracted to for-profit delivery partners, broken down by year. Given that the for-profit delivery partner population is composed overwhelmingly of foundation year students, the all-student partnership outcomes are a reasonable proxy – but they’re not the same thing.

And we can’t yet see the outcomes for the newest and fastest-growing providers. Several of those on our list appeared from nothing in 2022–23 or 2023–24 and have no continuation, completion, or progression data at all. The data will catch up eventually – but by then, tens of thousands of students will already have enrolled, borrowed, and in many cases dropped out.

The real problem

Everyone involved in this debate seems to be avoiding the bleeding obvious.

The problem isn’t foundation years per se. Foundation years delivered by universities, colleges, performing arts schools, and other specialist providers produce outcomes that broadly meet regulatory thresholds.

The problem isn’t entry qualifications per se. Outside of this group most students without A-levels do complete, and many go on to succeed.

The problem isn’t weekend or flexible delivery per se. There are good reasons for mature, working adults to study outside traditional patterns.

In our analysis, the overlap between rapid growth, foundation year concentration, no-qualification entry, and weaker student outcomes is heavily concentrated in a small group of for-profit providers and delivery partners, enrolling disproportionately high numbers of students without formal qualifications onto generalist business degrees – with a student profile that is more disadvantaged than the sector average on several measures – delivered mainly through franchise arrangements with registered universities.

The foundation year extends the loan entitlement by a year. The absence of entry qualification requirements removes any gatekeeping. Flexible delivery makes the model compatible with students who are working. The availability of maintenance support – cash paid directly to the student – appears to be one feature that may help explain the growth of this model. And for the franchising universities, the revenue from franchise fees may also be framed as supporting widening access objectives.

Taken together, these elements are consistent with a commercial logic in which features of the student finance system align with revenue growth. And they are selling HE to a group of people who, on any measure, look like the most “vulnerable consumers” the sector has – with little evidence that the professional diligence duties owed in law to that group are being met.

Meanwhile OfS’ condition B3 – the student outcomes regime that was specifically designed to protect students and taxpayers from this kind of provision – is not working as intended. That a clearly defined subsector of this scale can sit below all three indicative thresholds, year after year, while continuing to grow represents a failure to apply the regulatory tools available to the data that OfS itself publishes.

The consequences of that failure go beyond the students directly affected. Allowing it to grow unchecked has allowed the national data on foundation years, entry qualifications, and flexible delivery to be significantly distorted by a much narrower part of the market.

The result is that wider debates about foundation years, non-traditional entry, and flexible delivery are at risk of being distorted by patterns concentrated in a much narrower part of the market – while the owners of these for-profit providers pay dividends that in some cases exceed their annual profits.

And along the way, we see a distortion of lead providers’ headline access and participation performance, a real risk to the medium-term impact on what the government keeps calling the “sustainability” of the student loan system, and a set of recruitment patterns reflected in the data that have so far attracted limited regulatory attention.

The choices

The government’s approach so far has been policy whack-a-mole. Foundation years – cap the fee. Weekend delivery – reclassify the courses. Maintenance loan fraud – chase the students for repayment. Each intervention treats a symptom while leaving the business model untouched – catching legitimate provision in the crossfire.

The new OfS condition on subcontracting, effective from the end of March 2026, and the requirement for delivery partners with 300 or more students to register with OfS from 2028–29, are necessary steps. But they don’t address the fundamental problem.

The argument that for-profit generalist (often franchised) provision is meeting a need that would otherwise go unmet is harder to sustain when you look at where these providers operate. Traditional universities in London, Birmingham, Manchester, and Leeds – the very cities where these for-profit providers are concentrated – have significant spare capacity and are actively recruiting the same demographic groups: mature students, local students, students from deprived areas.

The clearest difference in the available data is in outcomes – which at these universities aren’t significantly below the sector average. There’s no shortage of HE capacity in London, Birmingham, Manchester, or Leeds.

To the extent that cutting off funding would cause financial difficulty for some lead providers – whose financial models have become dependent on franchise income – and collapse some delivery partners, any government acting would need to put time, money, and coordination behind an orderly process of transformation.

The interests of the students currently enrolled would need to be protected – they would need to be able to continue their education, at their lead provider or at another institution, without disruption. Some lead providers would need transitional support to restructure. Some delivery partners would close.

OfS has the tools to act. What’s been missing is the will to use them – and the recognition that the problem isn’t foundation years, or entry qualifications, or flexible delivery. It’s the growth of a for-profit subsector into a billion-pound industry funded almost entirely by public money, producing outcomes consistently below regulatory thresholds, under a framework that has so far failed to intervene at scale.

That the Conservatives opened the floodgates isn’t much of a surprise – deregulation was the point. Why Labour seems reluctant to close them is a harder question – not least because its entire opportunity mission for higher education depends on flexible delivery, on admitting students without traditional qualifications, and on foundation years as a route in. If it allows the growth of this clearly defined subsector to distort perceptions of those routes, it risks destroying the very mechanisms it needs most.