It said that it had placed an immediate block on Grafton, which means that the college will not be able to register or certificate students for Pearson qualifications while an investigation is carried out.

The Open University, which has recently begun offering degree courses in partnership with Grafton, said it was seeking “urgent clarification” from the college. Any partnership found not to be meeting its expectations on standards and behaviour would be ended with immediate effect it added.

Analysis by education editor Branwen Jeffreys

If you’re a student borrowing tuition fees and living costs, it’s meant to be the proof of your hard work to take to employers.

If it’s possible to buy a dodgy qualification to get on to a course, or pay someone else to do the work, the minimum value of a British degree is at risk.

BBC Panorama’s investigation comes at a time of massive change. The government is looking at whether new businesses could offer degrees from day one on a probationary basis, which could attract interest from companies operating elsewhere in the world.

The prize, insist ministers, is the chance of fresh thinking, more short degree courses, better value for money. The jeopardy is the risk of abuse of a taxpayer backed student finance system.

‘It won’t interfere with your work’

Panorama also filmed undercover inside one of the UK’s largest alternative providers, the Greenwich School of Management – also known as GSM London – which has more than 4,000 students at its Greenwich campus.

An undercover student secretly filmed a series of meetings with one freelance, Charles Logan, who has a contract with GSM to recruit students. The BBC understands Mr Logan receives approximately ВЈ600 for every student he helps to enrol, which is 10% of the tuition fees paid to GSM.

After the undercover student was admitted on to a three-year honours course in business management, Mr Logan put him in touch with someone who he said could do his degree-level assignments for him.

The student subsequently bought two assignments for ВЈ526 and a third from another online company. He submitted them as his own work. The deception was not detected and the purchased assignments were awarded good marks by GSM.

Those results were ratified by Plymouth University which validates and awards degrees studied at GSM. The university told Panorama that GSM is responsible for student admissions and attendance.

It says it has “long-standing and robust academic regulations and processes to prevent academic dishonesty and ensure the quality of its degrees”.

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GSM told Panorama that it has suspended its contract with Mr Logan and brought in external experts to investigate. It said if the allegations against Mr Logan are true, his actions are “totally unacceptable”.

Charles Logan’s lawyer told the BBC that he “emphatically denies acting fraudulently, either for profit or to assist students in fraudulently claiming student finance.”

The Department for Education said it takes allegations of fraud and malpractice extremely seriously and was grateful to Panorama for bringing these cases to its attention. “The use of fake qualifications or plagiarised assignments is absolutely unacceptable.

“It not only threatens to undermine the reputation of our world-class higher education sector, but also devalues the hard work of those who don’t cheat,” it added.

Ms Hillier said the private college sector had expanded rapidly and the government had not created a regulatory system that was fit for purpose.

“But it also has got to have a system that stops these chancers piling in and making money from the taxpayer.”

The Quality Assurance Agency said the Higher Education and Research Act, passed earlier this year, would create a powerful new regulator for higher education in England called the Office for Students.