Fraud investigation into student loans

The government have ordered the Student Loans Company (SLC) to launch an investigation amid growing fears that some students have submitted fraudulent applications.

The announcement comes as the Department for Innovation, Universities and Skills (DIUS) have announced a £200 million shortfall in the grants section as more students than ever have claimed their right to the available money.

The investigation, which was revealed in last Monday’s pre-budget report, will include random checks in eleven areas of the UK on students who are claiming the grants.

However, a spokesperson for SLC was quick to point out that "fraud isn't believed to be a significant problem within the student finance system; however the outcome of this pilot scheme will reveal its true extent."

The spokesperson added: "The amount of financial support that a student can receive each year is largely dependent upon their household income and essentially the spot checks will seek to confirm that information supplied—regarding for example the number of people in a household who are earning—is neither over or under-declared to ensure the correct amounts of student finance are awarded.”

A loophole in the means-testing system has also been discovered: if the family's income is based abroad and not at the domestic address where income is assessed then some students may be able to gain access to public money which they are not necessarily entitled to.

Grants of up to £2,825 a year are offered to students from homes with an income of less than £25,000 a year. In total, the SLC distributes over £1 million in loans and grants, and collects over £2 million from graduates in repayments each year.

Universities secretary, John Denham outlined the need for such an investigation. He said: "The government is investing billions of taxpayers' money into higher education, ensuring that anyone who can benefit from higher education has the opportunity to do so.

"That's why I've asked for these spot checks as it is absolutely the right thing to do, and prudent to continually check and improve the systems for ensuring the accuracy of information supplied to the SLC and preventing fraud from taking place.

"Those households asked to take part in the spot checks are not suspected of wrong-doing. No genuine applicant will have anything to fear, and no action will be taken if genuine errors have been made."

Wes Steeting, President of the National Union of Students, said: “I would be astonished if there was evidence of widespread fraud in the system.”

As a result of both revelations regarding fraudulent claims, and of ministerial miscalculations regarding student numbers, the government has reduced the maximum income threshold for receiving any kind of grant from £60,000 to £50,020 commencing next year.