Millions of university students are at risk of being left without loans and having their personal data exposed to hackers. 

IT systems at the Student Loans Company (SLC) are said to be at risk of ‘critical collapse’ due to out-of-date technology, according to government sources. 

Now, Education Secretary Bridget Phillipson is understood to be looking to AI technology and computers as part of a major overhaul. 

The Sunday Times reported the cabinet member believes some of the manually-entered data can be done automatically. 

It is hoped it would reduce costs which have swelled by 60 percent in four years to £255million in 2023/24. 

At the moment, 45 percent of SLC’s 3,300 workforce manually move the data between eight different IT systems. 

The newspaper reported that six of these are not compliant with data protection law and are could be at risk of cyber attacks.     

A government source said: ‘The education secretary thinks that nothing is more important than delivering for children and families through our Plan for Change. 

Education Secretary Bridget Phillipson arrives in Downing Street for a Cabinet meeting — April 8, 2025

Millions of university students are at risk of being left without loans and having their personal data exposed to hackers

‘She wants to build nurseries, schools and colleges ready for the 2030s — that’s why she is taking an axe to bureaucracy from bygone eras with upgraded tech, so money can be put where it’s needed.’

It comes weeks after Ms Phillipson 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.

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

It followed a Sunday Times probe which reports thousands of students with ‘no academic intent’ are suspected of fraudulently claiming hundreds of millions of pounds from the country’s university loans system. 

The newspaper said most of the students under scrutiny are thought to be at ‘franchised’ universities, which are colleges paid to provide courses for established universities.

There is a concern of potential ‘organised recruitment’ of Romanian nationals in particular to enrol on courses, the newspaper said.

The Sunday Times said the SLC spotted suspicious applications involving fake documents and address duplication, and franchised colleges are enrolling students who cannot speak adequate English.

Writing for The Sunday Times, Ms Phillipson said: ‘Today’s revelations of major misuse of public money and potential fraud by students in franchised universities deal a hammer blow to the integrity of higher education in this country.

IT systems at the Student Loans Company (SLC) are said to be at risk of ‘critical collapse’, according to government sources

‘They point to one of the biggest financial scandals in the history of our universities sector. They demand the firmest action.’

She added that franchising in some institutions has ‘become less about expanding access and more about meeting expanding overheads for hard-up universities’, and said the system also ‘lacks necessary guardrails against abuse’.

Ms Phillipson said the Office for Students ‘should have provided these guardrails’.

She said she has asked the Public Sector Fraud Authority to ‘co-ordinate immediate action across the system to halt this growing threat’.

In response to the fraud claims, the Department for Education 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.’