As many as ten British universities are in danger of going bust because of their reliance on risky franchising deals that see courses run and taught by private sector providers, The i Paper has been told.
The practice began as a way of extending higher education to hard to reach disadvantaged communities in areas without universities. But lending university brand names to external companies can also be very lucrative, earning cash strapped universities substantial extra tuition fee income for courses they don’t actually teach.
Its rapid growth has led to increasing official concern about the quality of some franchised courses and the amount of fraud associated with them. There were reports last year of agents recruiting students to university franchise courses on the basis that their resulting student loans would pay for multiple foreign holidays.
The Government announced a franchising “crackdown” last month that aims to tackle “rogue higher education operators”. It is proposing an extra layer of regulation and scrutiny that Education Secretary Bridget Phillipson says is necessary to “protect students and safeguard taxpayer’s money” (see box).
The intervention could ultimately stop some of the external providers running the courses from operating. But there are fears within higher education that the collapse of franchised courses could also bring down the universities that have lent their name to the operations.
A senior university executive, who has been directly involved in franchising, says that up to ten institutions could face bankruptcy if franchising deals fail.
“I can’t see a solution that doesn’t involve a few universities either going under or being bailed out,” the executive who wants to remain anonymous told The i Paper.
Their warning is being backed up by other knowledgeable figures in higher education. And the speed with which franchising has grown in a sector searching for new ways to balance the books – the number of franchised students nearly trebled to more than 135,000 by 2022/23 in just four years – has increased the risk.
Figures obtained by The i Paper illustrate just how much is being staked on franchising by some individual universities where the number of students taught by external providers can sometimes outnumber those being educated in-house.
Nick Hilman, Director of the respected Higher Education Policy Institute (HEPI) said some universities had become “very reliant on franchising”. Because they “tend to be the less prestigious institutions” they were the same ones already facing a particularly tough challenge as the whole sector was financially squeezed.
Hilman said that if the model led to universities going under there would be wider repercussions. “While it’s important to remember that franchising has a role to play in bringing higher education within reach of more people, it also needs to be remembered that, when it goes wrong, the reputation of the whole sector is put at risk,” he said.
The warning comes after the wider financial plight of higher education was highlighted again this week with the news that Bangor University aims to cut 200 jobs, with another 90 going at the University of South Wales. It follows similar announcements from two prestigious Russell Group universities – Durham and Cardiff – last month.
The university executive concerned about franchising arrangements fears that the collapse of such deals will be a further huge blow to the sector.
They have huge concerns about the way franchising has operated and described the tactics of agents used by some private providers to recruit students to franchised courses as “aggressive”. But it is the potential fallout from collapsed deals that they say could have the biggest impact.
“I think we’re probably at the point where the Government needs to tell universities they can’t set up any new franchises with UK-based private providers,” they said. “It’s hard to see a justification for them.”
“And then we need a way for universities to be supported to exit from the bad provision in an orderly way, to do as little damage as possible to the students.”
Asked how many universities might “go under”, they warned “as many as 10 could be at risk”. “Even without the regulator acting, the worst case scenarios for some of these institutions are becoming quite likely – some are so reliant on these partnerships that any move to close them would bankrupt the [university],” the executive added.
The Government’s public spending watchdog has highlighted how student loan fraud has dogged some franchise arrangements. And higher education regulator the Office for Students (OfS) has warned of the potential risk to students, taxpayers and the reputation of universities from the franchising model.
Official concerns over the rapid increase in university franchised courses and whether they represent value for money for taxpayers and students have been growing for more than a year.
By 2022/23 6.5 per cent of all students with student loans were on franchised courses. But in January 2024 spending watchdog the National Audit Office (NAO) warned that loans for courses with franchised providers represented a hugely disproportionate 53 per cent of the £4.1 million fraud detected by the Student Loans Company (SLC) in the same year. It said that some of this franchise fraud was “potentially associated with organised crime”.
In September the Office for Students (OfS) higher education regulator concluded that university business models relying heavily on such franchising “represent increased risk”.
“Unless managed actively and carefully, such arrangements can negatively impact students, taxpayers, the reputation of English higher education and the university or college itself,” it warned.
The regulator added that it had “concerns that public money is not always used appropriately” in franchising universities’ “subcontractual arrangements”. It said this could result in “harm to both students and taxpayers”.
“For example, tuition fees may be used to fund poor quality courses that are not good value for money, or tuition fees and maintenance loans may be paid out in relation to individuals who do not genuinely intend to study,” it said.
September also saw the Department for Education (DfE) pledging to act following “truly shocking” reports that agents recruiting students to franchised courses were telling them they could use student loan money to pay for holidays and that “95 per cent of people who get this money will never pay it back”.
Last month the Education Secretary Bridget Phillipson announced a “crack down” on “rogue operators who misuse public money and damage the reputation of our world-class universities”.
The DfE plan currently being consulted on is aimed at increasing the scrutiny of university franchise operators – which are mainly private companies. It would require them to be registered with the OfS by September 2027 if they want their courses to be eligible for student finance.
At the moment more than 200 of the providers are not directly accountable to the regulator. Once registered, they could be fined or face suspension if they don’t meet required standards.
Now figures seen by The i Paper reveal just how much some individual UK universities appear to be relying on franchising as the sector’s finances are squeezed, though there is no suggestion that these specific institutions’ arrangements are linked to fraud or poor quality courses, or that they could face bankruptcy.
Of Canterbury Christ Church University’s 27,110 registered full time undergraduates just 7,830 are directly taught by the university, according to the latest available OfS figures, covering 2022/23. The other 19,280 full time undergrads registered there – representing more than 70 per cent of the total – are actually taught externally via franchised courses.
In the same year Buckinghamshire New University had 13,670 franchise students, representing 77 per cent of its full time undergraduates, and more than three times the 3,980 that it directly taught in-house.
Speaking a few days after his retirement at the end of January, Professor Nick Braisby – the university’s former Vice-Chancellor – told The i Paper the franchise student figure was down to “about 12,000 now”. “We are on a planned reduction,” he said. “Because we historically, we’ve always had too many franchisee students, really, and we’ve always been on trajectory trying to reduce it.
“But that’s not easy either, because if you pull away from a franchisee, you can precipitate their failure. So you can suddenly find that there is no franchisee, because they’ve gone under. So you have to manage it quite carefully.”
He added: “There are some institutions that are most definitely on a trajectory of increasing their numbers rapidly. I personally think that is a big risk, and I wouldn’t support that at all.”
Professor Braisby, who wrote a HEPI paper calling for reforms to franchising, warns of “risks” to universities “where the proportion of effectively franchise students to their own students is so out of skew that they are very, very heavily reliant on it”.
He says this could now be reduced if the Government gets its regulation right. But he added: “If they bungle it they could easily precipitate failure, and it could come very quickly. So I think we’ve got to be very careful.”
He is worried about the length of time it could take a private franchise operator to get officially registered under the new scheme and what will happen if they don’t manage it.
“There’ll be some institutions [universities] that would fall over if their franchisees don’t get registered,” he said.
It is universities that could be on the hook for teaching students if a franchise course ends or is found to be inadequate by the regulator, potentially creating a huge financial liability for already struggling institutions.
At Leeds Trinity University, which recently topped national league tables for its journalism courses, £19m of its £53m student income came from franchising according to its latest available accounts for 2022/23.
However that income stream may now be jeopardised for the Yorkshire university following the OfS’s decision to follow up concerns about its franchised courses with an investigation into their quality and governance.
In September the OfS revealed that the Applied Business Academy, a private provider which worked with Leeds Trinity and the University of Buckingham (a different institution to Buckinghamshire New University) ) had stopped providing its higher education courses, following a separate investigation into the ABA.
A Leeds Trinity spokesperson said: “We understand and take seriously our obligation to comply with all relevant rules and guidelines to meet the sector’s regulatory requirements. Leeds Trinity University is working with the Office for Students to ensure transparency and assurance in relation to the institution’s franchise partnership arrangements.”
Canterbury Christ Church University said it was “dedicated to widening access to higher education” and “working with a small number of high-quality partner providers” allowed it to do this.
“We also ensure that we invest in robust governance and management measures so students studying on courses delivered through our partners receive an outstanding experience and a high quality education that will benefit them, as well as the communities they will go on to work in,” a spokesperson added.
Franchising was originally seen as a good way of widening access to higher education for students from deprived areas who might otherwise miss out on a university education – and in some cases it still can be.
But the model has also proved very attractive and lucrative for universities at time when many are struggling to stay afloat.
Universities that lend their names to a franchise take between 12.5 to 30 per cent of the £9,250 tuition fee for every student signed up, according to the Office for Students regulator, even though they don’t actually teach them.
The OfS says this income helps to explain the “exponential growth” in the number of franchise students in recent years.
There is also money to be made by private franchise providers from their cut of the tuition fees and a financial incentive to enrol as many students as possible. And according to reports the students have, in some cases, been encouraged to join courses with suggestions that they can spend the resulting student loans on foreign holidays
The National Audit Office (NAO) says providers have been using agents on commission to recruit more students. It says that one scheme promised £500 for each new person enrolled if existing students could sign them up.
“These practices can create incentives to recruit students who may not meet admissions criteria, for whom the course is not appropriate, or who may not be committed to the course,” the watchdog warns.
Latest figures show that franchise operators do not represent the usual mix of university subjects – with 62 per cent of students on franchise courses studying business and management, according to the OfS.
The regulator reports that franchise students are much more likely to be over 31, and from a deprived background compared to other university students. More than half (55.3 per cent) of the franchise students have no, or unknown, entry qualifications, and around two thirds applying for student loans for franchised courses “were from nationalities where English is not the first language”.
“Students’ opportunities will not be extended if they are recruited onto courses that are poorly delivered, lead to weak student outcomes, or are not well suited to their level of English language proficiency or prior educational experience,” the OfS notes.
The NAO reports how “evidence of widespread plagiarism and cheating” had emerged at one franchise provider, with most of the 1,389 students “not producing their own assignments”.
The university responsible for the franchise removed the cheats from their courses, but initially tried to retain the 20 per cent of their tuition fees it had already taken – amounting to £6.1m, which it eventually had to pay back.
The OfS notes that franchise students “have been encouraged to register for courses that they do not genuinely intend to study, to access public funding through maintenance loans”.
“In some cases, students have withdrawn from courses shortly after receiving these funds; in others there are grounds to doubt that they are continuing to study, despite their termly attendance being confirmed,” it warned in September.
Commenting on the growth of franchising Nick Hillman, director of the High Education Policy Institute, told The i Paper: “I think it’s a scandal waiting to happen… some of the companies are making enormous sums of money, and you do wonder where it’s going, because to deliver a really good quality higher education does cost at least £9,500, which a regular university gets to deliver it.
“There are some really big risks here, but for some people, it is the only route to higher education that exists – if you’re a single mum with two kids, you’re only going to go to higher education if it’s on your doorstep. And there are lots of towns up and down the UK that have no higher education in terms of traditional provision.
“So the danger is we react to these problems by banning it all. But the Government’s now moving down the route of taking the regulatory approach, and that is the right approach,I think.”
The OfS told The i Paper that it was working to make sure university franchise arrangements were of a high quality.
“That includes making sure students recruited onto courses have the commitment and ability to succeed. It also includes making sure there are proper controls to protect public money,” said OfS chief executive Susan Lapworth.
“The OfS is working on these issues. We have announced investigations of some providers engaged in franchising and are taking steps to ensure all universities are properly gripping these partnerships.”
A Universities UK spokesperson said: “Franchised partnerships are an important element of widening opportunity, helping many who otherwise could not access higher education to succeed.
“Universities take seriously the need to ensure students receive a high-quality education wherever they study, with franchised partnerships being no exception, and our own franchise governance framework is helping them to do this.
“The financial stability and longevity of all provision is of the utmost importance, and universities work closely with DfE, the Office for Students, and other sector bodies, in order to ensure this.”
A Department for Education spokesperson said: “Whilst universities are responsible for managing their own budgets, we have already taken tough but necessary choices to bolster their financial sustainability to help drive the growth needed through our Plan for Change.
“Franchising can be a valuable tool to widen access to higher education, but we also need to ensure students can trust the quality of their courses, no matter where or how they choose to study, and our robust reforms will protect students and safeguard taxpayer’s money.”
Comments
Leave a Comment