Students lose millions in loan scam

Students lose millions in loan scam

A government-backed student loan scheme has been targeted by fraudsters, leaving victims with no tuition and debts totalling millions of pounds.

Now the powerful all-party parliamentary education committee is to investigate how the government failed to vet companies registered for the Career Development Loan (CDL) scheme, allowing criminals and failing businesses to profit at the expense of students. The scandal has echoes of 2001 when the Individual Learning Account initiative collapsed after mounting evidence that no tuition had been provided by some of the companies that picked up government grants.

The education committee found that the learning accounts debacle had cost taxpayers up to £400m. Barry Sheerman, committee chairman, said he would now turn to CDLs: 'We are going to be asking some probing questions about this.'

The scheme gives students access to interest-free loans of up to £8,000 if they train with one of 2,000 training providers named on a register at the Learning and Skills Council (LSC). So far more than 100 firms on the list have gone bust, leaving students with debts to pay off but no courses to attend.

Banks handing out the loans and industry leaders have expressed dismay that companies with poor track records were allowed to join the scheme. A source inside one bank admitted that it would consider pulling out of the scheme if procedures were not improved.

'The fact that the council has no quality.....continued below

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control over its learning providers is appalling,' said Colin Steed, chief executive of the Institute of IT Training. 'While anything that helps improve skills-based learning is to be applauded, quite frankly the way in which this scheme is administered suggests that the LSC is failing in its duty of care.'

A whistleblower who worked at four of the companies admitted they used the fact they were 'government-backed' to hard-sell courses and then accrue money through loans. Once the courses began they did not care if the students dropped out, he said, with some having a 90 per cent attrition rate.

Train 4, an IT training company, received an estimated £250,000 but students never received any training and the firm has disappeared. It later emerged that it was being run by Michael Threapleton, who served a 12-month sentence for corruption just over six years ago.

Scott Smith, from Kings Lynn, Norfolk, enrolled on a course at Train 4 last year. 'They advertised that they were approved by the government, and that was part of the reason I went to them,' he said. He took out a loan of £6,000, of which £4,000 went directly to the company. But after receiving confirmation that the money had been sent he never heard from Train 4 again. 'I found out on the internet that they had ceased training.' Smith is still being pursued for the £4,000 he never saw.

Last year the council was forced into removing Britannia IT Training from its register after student complaints. The firm went into administration last October leaving behind 600 students without training - 424 of them had loans to repay totalling around £2.5m. Neil Richardson, an aviation safety consultant from Witham, Essex, gave up his dream of becoming a pilot after the firm Pilot Assist went into liquidation and was left paying off £8,000 over four years.