Private providers in England wanting their students to access publicly funded loans will for the first time be required to undergo checks on quality.

However, unlike universities, these providers will not have to undergo full institutional review by the Quality Assurance Agency or subscribe to the Office of the Independent Adjudicator, which reviews student complaints.

The Department for Business, Innovation and Skills last week published draft guidance on its proposed new rules for private providers seeking ¡°designation¡± for their courses - making their students eligible for Student Loans Company funding to cover fees and maintenance.

The new process will be administered by the Higher Education Funding Council for England, bringing it into contact with private providers for the first time.

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The coalition has already used the designation system established by the Labour government to boost the private sector, where student numbers will not be capped until 2014-15. SLC funding for students at private providers rose to ?100.3 million in 2011-12, up from ?42.2 million the previous year.

BIS says in its draft guidance on designation, which is open to comments until 10 May, that it is ¡°essential that government ensures that there are robust processes in place to protect the interest of students, the reputation of UK higher education and the public investment¡±.

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The rules, which will apply from 2013-14, state that to proceed with an application for designation, private providers must have undergone a ¡°recent, successful QAA review¡± and pay a subscription or annual maintenance fee to the QAA.

Providers will be eligible for designation if they have successfully undergone institutional review or educational oversight. If they have not, they will be required to go through a new type of QAA scrutiny, called review for specific course designation, to be undertaken every four years.

On finance, BIS says the system will establish that providers seeking designation have a ¡°low risk of failure¡­over the medium term¡±, check that they are owned and run by ¡°fit and proper persons¡± and look at accounts and forecasts.

Private providers will still be limited to ?6,000 fees via the SLC in 2013-14 and 2014-15, meaning that they will not come under the remit of the Office for Fair Access.

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Carl Lygo, principal of for-profit-owned BPP University College, said the ¡°much tougher regime¡± would ¡°squeeze out the unscrupulous who are more interested in their bottom lines rather than delivering high-quality education¡±.

Sally Hunt, general secretary of the University and College Union, welcomed news that the government had ¡°finally taken action to regulate the shadow higher education sector, ending the scandal of unregulated subsidies to the for-profit sector¡±.

But she argued that in key areas for-profit providers would ¡°still be subject to less regulation than our established universities¡±.

john.morgan@tsleducation.com