Just under £71m of the £92m requested has been withheld by the Student Loans Company (SLC) since 2019 after the loan applications were found to be fraudulent.
The SLC said this “can” be recovered but could not confirm how much of the money had been recovered to date.
The number of fraudulent applications for student loans increased year on year from 761 in 2019 to 3,191 in 2024, with a lull during the pandemic.
The average fraudulent claim amounted to £12,065 in 2024, including loans that were both withheld and paid out by the SLC.
Fraudulent claims can include applications that involve identity theft, false documentation on UK residency, incorrect information on marital status, and links to organised crime, among other things.
The SLC said it has strict controls in place to protect against fraud and abuse of the student finance system.
However, recovering lost funds could be more difficult in cases where false documents have been used to apply for loans and grants or offenders have moved abroad. It can also be difficult to recover if the money has been moved to other bank accounts.
“Every penny that is paid out fraudulently comes out of taxpayers’ pockets and could have been put to better use. These new numbers, and the growth in suspected fraud, show why it is so important that the SLC is funded and staffed properly.
Mr Hillman raised concerns that the SLC’s budget could be cut under Labour’s plans to reduce departments’ spending, weakening its ability to cope with student finance fraud.
A DfE 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.
When a claimant is found to have made a fraudulent claim, they may be referred to the UK’s national fraud database, which impedes their ability to obtain credit and removes all student funding for a maximum of six years.
An SLC spokesperson said: “We have controls in place to protect again fraud and abuse of the student finance system, and take robust action to do so, working closely with Government and the Office for Students.
“Significant measures exist to assess students’ eligibility for funding, which are administered along with partners across Government, to ensure students are eligible for funding before any loan payment is made.”
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