Thousands of mostly foreign students are suspected of fraudulently claiming hundreds of millions of pounds from Britain’s university loans system. People with “absolutely no academic intent” are believed to have enrolled on degree courses to take out loans with “no intention” of paying the money back. Education officials believe there is “organised recruitment” of Romanians in particular to enrol.

Most of the students under suspicion are believed to have enrolled at “franchised” universities, small colleges paid to provide courses for established universities but which often have lower grade requirements. Officials at the Student Loans Company (SLC), the Department for Education (DfE) and lecturers were interviewed as part of the probe. It is understood that between 35% and 55% of applicants last year were Romanian at some universities with franchised providers.

And it is believed that some franchised colleges are enrolling students who cannot speak adequate English, or accepting screenshots from the Duolingo languages app as proof of proficiency.

Now Education Secretary Bridget Phillipson has asked counter-fraud experts to lead an investigation into the university loans system over fears students are claiming millions of pounds with no intent to study.

Ms Phillipson directed the Public Sector Fraud Authority to help co-ordinate the response to the allegations and support the investigations already under way.

One university employee claimed some students who enrol on franchised courses drop out after receiving their first £4,000 maintenance loan, then enrol the following year to claim the cash again.

One franchised college made £234 million in revenue last year and increased its profits by 1,266% in just three years. The SLC identified 3,563 suspicious loan applications in 2022-23, totalling almost £60 million.

But recent investigations suggest even greater levels of potential fraud. The UK’s student loan debt, underwritten by taxpayers, has soared to £236 billion.

Education Secretary Bridget Phillipson said potential fraud by franchised universities students dealt a “hammer blow” to the integrity of higher education.

She announced that the Public Sector Fraud Authority will investigate the suspected exploitation of the system. Ms Phillipson added: “The Student Loans Company has been working with law-enforcement agencies to investigate the prevalence of some Romanian students at certain institutions.

“But not enough care was taken to join the dots of wider abuse taking place across the system and to slam the door shut on widespread abuse. We must go further and faster to protect the public purse.”

Vivienne Stern, chief executive of Universities UK, said: “If there is evidence of fraudulent behaviour, we completely agree that it must be rooted out.”

Ms Phillipson said she will also “bring forward new legislation at the first available opportunity to ensure the Office for Students has tough new powers to intervene quickly and robustly to protect public money, in addition to the stronger remit I have given it to monitor university finances”.

A Department for Education spokesperson said: “We will stop at nothing to protect public money; any misuse of student loans is an insult to hard-working students striving for better opportunities.

“Our plan for change will restore trust in our universities. We have already taken clear action to crack down on rogue franchise operators to tackle fraud and we’ll go further. We will overhaul regulation so the Office for Students (OfS) better-protects taxpayers’ money. In the meantime, we have asked the OfS to clamp down on franchising.

“The Education Secretary has asked the Public Sector Fraud Authority to help co-ordinate the cross-government response to these extremely concerning allegations and support the investigations already under way.

“Where misuse or fraud is found we have powers to claw back payments – and we won’t hesitate to use them. We will bring in tough new laws to ensure the OfS can quickly stop bad actors gaming the system once and for all.”

The Student Loans Company has blocked student finance payments after similar concerns were previously identified, it is understood.