Regulator warned GSM of loss of loan access before it went bust

For-profit college GSM London was warned by England’s regulator that it was set to lose access to public student loans shortly before going bust, Times Higher Education can reveal.

GSM, England’s biggest for-profit college, which received £152 million in public money via tuition fee loans in the six years to 2017, announced on 31 July that it had entered administration and would cease teaching at the end of September.

THE can disclose that the Office for Students, the new sector regulator, wrote to GSM on 11 July to say that it was provisionally intending to refuse the college’s application for the register of providers – thus cutting off access to public Student Loans Company funding.

GSM’s statement on 31 July said it had been attempting to find a new owner, but when a sale proved “not possible to achieve” it entered administration. The college said that this decision was taken before GSM received the OfS letter.

The Department for Education, which was previously in charge of regulating alternative providers, allowed GSM to continue accessing SLC funding in November 2018 despite knowing of fears that it would collapse into administration earlier that year after running into student number problems. The DfE approved a turnaround plan that saw GSM’s ultimate owner, private equity firm Sovereign Capital, agree a deal including the waiving of £26 million of debt.

The DfE decision meant students carried on entering GSM until public loan access for new students was halted in June.

The OfS letter to GSM last month, from its chief executive Nicola Dandridge, cited data on the college’s dropout rates, but also said the regulator believed that GSM was “not financially viable or sustainable”.

GSM was “technically insolvent at 30 September 2017 and 30 September 2018 and continues to be at material risk of insolvency within the period 2019-20 to 2021-22”, said the OfS letter.

Ms Dandridge told GSM it could make representations before the OfS reached a final decision.

The letter raises questions about why the DfE and the OfS took conflicting judgements on essentially the same financial facts at GSM. The college’s students may have been caught between two different regulatory regimes: a DfE one aimed at supporting new and for-profit providers; and an OfS one that includes a focus on providing for “market exit”.

Matt Waddup, head of policy and campaigns at the University and College Union, said there “have to be questions asked about why the DfE backed a turnaround plan for GSM that the OfS was not happy with”.

“Ministers’ obsession with helping private firms access public money via student loans has surely gone too far if the true state of an institution’s finances are being hidden from students,” he said.

One student at GSM’s Greenwich campus said she had given up a job at Tesco to take her GSM course, and taken out between £18,000 and £20,000 of student loan borrowing. The uncertainty over whether she would be able to complete her course was “affecting me mentally” and she had “lost concentration on my coursework”, the mother of two said.

Koua Affian, 48, said he signed up to his course because it was “designed for adults”, offering “more time to look after the kids”. He expressed scepticism about whether courses at a university would offer the same flexibility or cover the same modules.

A GSM spokeswoman said that the college was due to open a support office on 7 August to advise students on their transfer or course completion options. She said that GSM and the University of Plymouth – which validated degrees taught at GSM – had spoken to “several different higher education providers about possible options for transferring students”.

“We have had enthusiastic responses from at least 15 London-based higher education institutions with OfS registration,” the spokeswoman said.

john.morgan@timeshighereducation.com