Private sector and students profit at the college they call 'the ATM'

Undercover Guardian investigation reveals how colleges are booming in wake of government changes to loan system

Half an hour after the lecture is supposed to have started, a solitary teacher is hunched over the terminal at his desk. Asked by an undercover Guardian reporter why there are no students in the 40 chairs in front of him, he says plainly: "Well, I'm waiting for them." They might be working on submissions for examinations, he adds, though he doesn't sound convinced.

This is the London School of Science and Technology (LSST), based in a multipurpose office block above a Tile Depot shop in Wembley in the north-west of the city, a college that should be a prime example of universities minister David Willetts' vision of a booming private college sector.

LSST has tripled in size in two years to 1,500 full-time students and is the fourth largest private college of its type. It has been a beneficiary of the changes to funding introduced by Willetts to relax restrictions on student loans.

Willetts wants the UK's new profit-making sector to take pupils from the poorest backgrounds and raise their prospects. But a walk around corridors that should have been teeming with LSST's hundreds of full-time students on business and computing higher national diplomas revealed a less inspiring picture.

Outside, during a cigarette break, a mature student dressed in jeans and a hoodie explained why he thinks the college has grown. "Some people only sign up to get the money. Straight up … Before [the government] catch up with you I think you can get 10 grand out of [the Student Loans Company]."

London School of Science and Technology
London School of Science and Technology has tripled in size after changes to the student loans system. Photograph: Graeme Robertson for the Guardian Photograph: Graeme Robertson for the Guardian

The Guardian spent two days undercover at the college, and has spent months reviewing documents and speaking to whistleblowers who have worked at LSST in senior positions. They allege the college has knowingly enrolled students on its undergraduate-level courses who cannot speak English, or do not have basic literacy skills. Its students also often fail to complete diplomas, and the rates for submitting coursework hover around the 40% mark – well below expected standards.

Overall achievement is so low, the former vice-principal alleges, because all that matters to the college is increasing turnover.Each student represents up to £6,000 a year in student-loan-financed tuition fees for LSST. And as students are allegedly rarely struck off the college roll when they fail to attend classes or hand in work, they continue to receive thousands of pounds in student loans and grants – up to a maximum of £11,000 a year. LSST students have received more than £25m over the past three years; £6.5m of that going to the college to cover tuition fees.

A perception that control over the distribution of public money is lax means the college is locally referred to as the "ATM" or the "cashpoint", claimed a former lecturer, whom the Guardian is calling Ali. "The British taxpayer is being hoodwinked," he said.

During undercover filming, students in the hallways were unsure where their lectures were being held; there were multiple doors that had signs saying classes had shifted rooms. At one point, the Guardian was approached by security – and then directed to the admissions office, one part of the school that was a hive of activity. A senior admissions manager was discussing the fate of a student whose attendance was below 30% with a man in a T-shirt who appeared to be representing several students.

LSST said the allegations were untrue. It described its mission as challenging: "We are providing a valuable service to communities that are often overlooked or are underserved by the public HE sector, and in doing so we are making transformational change."

The college's pupils are certainly a diverse group. Those from the surrounding deprived boroughs are mainly from the large Asian and black populations. Many other funded students come from around the EU.

According to two sources, the college has used street agents who recruit outside jobcentres, tube stations and even Ikea to bring people to the college.

Ali alleges the college invites people off the street to study at a level far beyond their ability. "You had students who could not use a computer, whose basic command of the spoken English language is not even there, and these are home [UK] students." He said that if, like many of those enrolled, you do not expect to earn more than £21,000 a year – the threshold at which student loans are now repayable – then £11,000 in loans and non-repayable grants for living is simply free money. "Once you are in the Student Loans Company [system], it's quite a lucrative place to be."

Several LSST students who talked to the Guardian during undercover filming supported the allegations. One claimed: "The common knowledge about this uni is it is a quick way to get money. They don't have a process here where they [academically] screen people … so they have a high turnover of students that come here and just go."

The college said its admission process was appropriate and "desires to be inclusive in order to offer education to all who are both eligible and can benefit".

LSST was founded in 2003 and is owned by the Zaidi family. Syed Zaidi, who owns 75% of LSST's shares, is also director of the college. He declined an interview request but gave a written response.

While tuition fees have risen at esta​b​lished universities, new private providers have received an injection of over £1bn. The rates of growth have been astounding. One college group, the London School of Business and Finance, went from 50 to 6,000 funded students in a year. The latest official figures indicate there may be 60,000 private students eligible for funding. This year the government projects that another £900m will be paid to them.

The colleges have developed unorthodox practices in recruitment and marketing to maximise enrolment. Whereas universities enrol students in September and maybe January, private colleges relentlessly enrol every two months.

The Department for Business, Innovation and Skills (BIS) has also stopped government cash going to hundreds of domestic students enrolled at LSST after it discovered the college had opened new campuses in Luton and Hounslow without seeking proper permission.

LSST said that over all, it is subject to "a high degree of external scrutiny, including that of its achievement data and the inputting efforts around teaching and learning".

It added that inspections (and for 2013) have "reported favourably on both our systems and our achievements … Likewise students have reported favourably (internally and externally) of the opportunities made available to them. The school's efforts to continuously support its students to overcome the academic challenges that come with studying at this level, while also juggling social, domestic and professional commitments alongside their studies, has yielded successive improvements.

"We continuously strive to improve our processes and indeed have updated our systems accordingly. Ultimately, however, it is for the student to make a proper declaration to SLC [Student Loans Company] to draw down funding," LSST said in a statement.

LSST is not the only college where staff and students have approached the Guardian with serious concerns and complaints. Until recently, the BIS has not asked colleges to submit audited accounts and demonstrate a financially sustainable business plan.

David Willetts at Conservative party conference, Manchester, 2013
David Willetts' changes to education funding were intended to help the profit-making sector take more pupils from poorer backgrounds. Photograph: Ray Tang/Rex Features Photograph: Ray Tang/Rex Features

No one can say how much of the £1.4bn in loans and £500m in grants given to students at these "alternative providers" will have gone to genuine students. What is certain is that the size of the outlay caught BIS off guard and the impact has already been felt by students at established universities.

In the last few months, to deal with "a major fiscal challenge", the government announced large unplanned cuts to the budgets that support increased participation of poorer students and allowances for disabled students in the university sector. Speaking to the Guardian, Willetts said the regulatory regime had already been improved: "The evidence you have in some specific cases appears to show unacceptable behaviour …

"Students and taxpayers are right to expect a quality education service. That's why we have toughened the regulatory regime." He said that in most cases the Quality Assurance Agency and others had already acted and added that the government would "collect back" student loan money that had been falsely claimed. Defending his reforms more widely, he said: "I believe that the diversity of provision works in the interest of students. There are, I believe, tens of thousands of people who are getting educational qualifications which prepare them for the workforce that they would not otherwise have got … We have expanded educational opportunities."


Andrew McGettigan, Shiv Malik and John Domokos

The GuardianTramp

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