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Students attending alternative higher education providers have claimed public financial support they were not entitled to, with many not even being properly registered to study, says report.

The report highlights how 992 ineligible EU students were able to claim £5.4m in support before the department for business, innovation and skills (BIS) suspended payments. For-profit colleges have enjoyed phenomenal growth in recent years, while dropout rates at nine alternative providers were higher than 20% (the average dropout in the rest of the higher education sector is 4%). The total amount of public money for students in for-profit colleges has rocketed from £42m in 2010/11 to £340m in 2012/13.

Earlier this year, The Guardian revealed damaging allegations of poor standards, minimal attendance at lectures and suggestions that private colleges were recruiting students simply to access large sums of public money.

The report supports claims made by the University and College Union (UCU), which has repeatedly warned about the lack of proper quality checks at private institutions. Union officials said the report had to be the first step in proper regulation of for-profit colleges which have been handed millions of pounds of public money via student loans.

‘While we are pleased the misuse of public funds is finally being brought to light, we remain angry that it took so long to happen’, said UCU general secretary, Sally Hunt. ‘We raised the issues of for-profit colleges’ access to taxpayers’ money time and again with ministers, but we were ignored at every turn. Future governments need to study today’s report and the sector’s failings when it comes to dealing with privatisation.’