For many years there have been private providers (also referred to as alternative learning providers) in the higher education sector. Private higher education institutions receive no direct public funding from the Higher Education Funding Council for England (HEFCE) but some receive fees for certain courses through the student loans system.
Alternative providers are generally small: two thirds are specialist institutions that offer courses in areas such as business, IT, theology and alternative medicine. In the past private providers offered mostly sub-degree courses to overseas students.
However the number of home students applying for their courses is increasing.
How big is the private higher education sector?
A study by the Department for Business, Innovation and Skills (BIS) identified 674 private providers in the UK in 2011–12 and estimated that 160,000 students were undertaking higher education courses at these institutions.
This compares to around 2.5 million students registered to study at the UK's 163 publicly funded higher education institutions in that period.
Expansion of the private higher education sector since 2010
In July 2010, just three months after coming to power, the previous Government created the first new private university in over 30 years when it conferred university college status on BPP.
The next year, the Government published the 2011 Higher Education White Paper - Students at the Heart of the System: in this, the Government committed to opening up the higher education market, and as part of this process it increased the maximum tuition fee loan available to full-time students studying eligible courses at alternative providers from £3,375 to £6,000 per year.
Following this, in June 2012, the criteria for the granting of university status was changed to allow smaller institutions to qualify.
There are now eight private higher education institutions with degree-awarding powers in England (up from four in 2009), four of which have university status (up from one in 2009).
Some, such as BPP University, are for-profit, while others, such as the University of Law, have charitable status. Only one, the University of Buckingham, offers a similar range of courses to public universities.
How does public money fund private higher education?
Students on courses at private providers that have been designated by the Secretary of State as eligible for student support may receive fee loans, maintenance loans and grants in the same way as students at public higher education institutions.
Figures from the National Audit Office (NAO,) based on Student Loans Company data, showed that there were 52,745 publicly-funded students at alternative providers in the 2013–14 academic year.
This is a significant increase from 2008-09, when only 3,818 students received public support. Currently around 140 private providers receive income from student loans.
As a result of the increased number of students accessing student funding the costs have risen sharply. In 2011–12 the cost of providing public support to students at private providers was £100 million; by 2013–14, it had increased to around £675 million.
Dangers of rapidly expanding the private sector
The increase in private provision has not been without problems.
The biggest expansion of designated courses has been in sub-degree courses. The rapid increase in the number of Higher National Certificate (HNC) and Higher National Diploma (HND) students at private institutions and the rising cost of support led David Willetts to announce a curb on the number of students at 23 providers in 2013 and to impose student numbers controls on private providers from 2014–15.
Also in 2013 fraudulent payment of student maintenance support resulted in the suspension of student support payments to EU students at private providers until entitlement could be proved.
Some commentators, such as the University and College Union, have questioned the wisdom of allocating public funding to institutions that might be below standard and could damage the reputation of the UK higher education sector.
Reports by the NAO and the Public Accounts Committee (PAC) also questioned why the sector was allowed to expand without more regulatory oversight and highlighted poor attendance by students, high dropout rates and cases of student support fraud at some private providers.
The future – improving confidence in the sector
The regulatory regime for private providers has been tightened and institutions applying for designated course status in 2013–14 had to meet stricter standards on financial sustainability, management, governance procedures and external quality controls.
In January 2015, further controls on private providers were announced in response to the NAO and PAC reports. These included annual re-designation of some providers for student support purposes and strengthened quality control processes.
Whether the private sector develops into a viable complement to the public sector, filling gaps in provision and offering low-cost flexible courses, remains to be seen.
Much could depend on whether the new Government tackles the overdue issue of reviewing the entire higher education regulatory framework – this step could improve confidence in the sector and ensure that students are well served by all alternative providers.