0.03 per cent of student maintenance loan payments might be fraudulent – and that’s still too much
David Kernohan is Deputy Editor of Wonkhe
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If you are just up after a heavy night, you may be forgiven for thinking that the clocks have gone back a full week.
Once again, the Sunday Times has splashed on student loan fraud – Jim has already picked up the key points of this update.
For me it is a question of data, and one of volume. Each year, the Student Loans Company (SLC) pays out around £8bn in full time student maintenance loans in England – so over three years we are looking at something in the region of £24bn.
The Times claims that £22m of maintenance loans were identified as fraudulent during this period. This represents 0.09 per cent of the total spend. Of this £22m worth of fraudulent maintenance requests, £14.9m – two thirds – were not paid out to students.
So, of the £22bn spent on maintenance loans over three years, 0.03 per cent has been paid out to people believed to have committed fraud.
As a handy comparator, the proportion of all tax payable in the UK that has not been collected is 4.8 per cent (£39.8bn).
SLC does publish data on payments by registering provider (in the supplementary tables).. The latest release presents what was an in-year snapshot for the 2023-24 academic year, plus full data for 2023. The Times’ reporting sticks resolutely to the three year period from 2022, although we get flashes of data relating to the current year – suggesting a freedom of information request, which SLC will doubtless publish in due course.
The nub of The Times’ story, as it were, is a league table. We get the top six providers with the highest proportion of this £7.1m claimed by students linked to them.
“Linked” is doing a lot of work here. Five of the six listed providers have a great deal of franchise provision – and it is impossible, apparently, for SLC to identify whether these fraudulent claims come from individuals supposed to be taught by the university itself or a franchise partner.
If you think about the way applications work – to apply for maintenance funding you do have to tell SLC the name of the course you are studying and the provider you are studying at. SLC will then check this information against a master list of eligible courses and providers – and it is at this point that your application is linked to a main provider.
The main provider is the one that needs to confirm your attendance – which it can only do based on assurance from the franchise provider. It then has to submit a “change of circumstances” (CoC) notification, and if this happens before the date your institution has specified as a cut off point there will be no tuition fee loans paid with respect to that student for a that year (if this happens at the start of the academic year), or a proportion of the academic year (if this happens at the start of term 2 or term 3).
That’s tuition fees, but maintenance loan payments come earlier in the year. Usually your enrollment needs to be confirmed by your university for each term, and you get paid shortly after that.
So what seems to be happening in some of these fraudulent cases is that students are enrolling, receiving maintenance loans, and then not turning up – so tuition fees never get paid. Because this only works for one term, the maximum you can get (full time, away from home, in London) if you do it this way is about £3,500.
It is important to remember that it is entirely legitimate to enrol for a course, study for the first two weeks and realise it isn’t for you. Maybe the course wasn’t what you expected. Maybe you can’t afford to study and live with your available finances. Maybe you’ve had a change of personal circumstances that mean being a full time student isn’t for you. Generally in these cases SLC will claw back maintenance funds from your bank account, or set up a repayment plan for you.
If you are committed to keeping them you need to transfer the funds to another account, close the first account, and disappear (checks are stringent so you will need some help with this). The address, contact details, and national insurance number you supply will need to be convincing enough to fool SLC (and it is an organisation that takes personal checks very seriously). You would probably need the help of organised criminals to provide convincing but fake information.
The other arm of this could be that providers (almost certainly franchise providers that would be expected to have regular contact with their students) are incorrectly marking students as attending when they are not. This would result in fraudulent claims of both maintenance and fee loans – something that the Department for Education, Office for Students, and SLC would take very seriously indeed.
A lead provider needs to be able to trust its franchise partners to provide accurate data – it is liable for the consequences of inaccurate or fraudulent data. In most cases it can – but it appears in a few cases there have been problems with these assurances.
The amount that is genuine fraud is only the tip of the iceberg. There are a lot more who register, so accessing the loan and then disappear, not just at franchises.
To access the maintenance loan you only have to have your attendance confirmed once, fees are different. The loan will be paid unless a COC is submitted.
There is a massive difference between having an attendance policy and actually enforcing it.
If, for non UCAS entrants, maintenance loans for the first four months of a programme were paid monthly on confirmation of attendance, I think there would be a dramatic fall in the scale of the problem. Most of the fraud, as SLC report, relates to fraudulent ‘Child Care’ and ‘Migrant Worker’ claims. I suspect that those claims are mostly submitted by individuals introduced by a handful of third party agents.
As @David Ealey says, this is just the tip of the iceberg. It has more to do with the fact that the SLC is not picking up fraud and misuse than it not existing. This will be a massive scandal once we have the data on continuation and completion rates for the last few years (assuming that it does not continue into fraudulent award of qualifications to mask that issue)
The “maximum of £3,500” assumption presumes that a non-attending student is removed from the rolls within a term of total non-engagement. This is, in fact, not a certain outcome at all genuine institutions.
At an institution where facilitating fraudulent claims is built into the business model, that maximum should really be at least £13k; and really, could be more as they can presumably have some of those students “repeat” a year of non-attendance. Theres no reason for such an institution to cut off its fees income on the basis of non-attendance, because such an institution is not built to facilitate compliance.
You can’t allow your knowledge of good and proper practice to shape your expectations of improper practice; naturally, such actors don’t care about that.
That is absolutely spot on. HESA/OfS actually had some means of assessing this before they took the wrong decision of removing module result from the HESA return. It would have been fairly easy to spot the number of ‘full time’ students who had all module fails and then came back the next year and did the same. Unfortunately the OfS got obsessed with the wrong things, like the relatively small number of students who start a course late.
This all depends on how you define ‘Student Loan Fraud’. I would say that the wholesale mis-selling of degrees by the HE sector which entices young adults into £60k of debt; but they end up with no career pay benefit is fraud. In which case the figure isn’t 0.03% , it is more like 35% of student loans that are fraudulent.