Some in the sector argue that the government has successfully fostered a market in which different providers offer differing fees after an announcement by the Office for Fair Access suggested that some further education colleges will offer cheaper degrees.

And senior figures expect that the forthcoming higher education White Paper will allow students at private institutions to receive publicly funded loans up to the ?9,000 maximum from 2013-14.

Private providers would be expected to submit access agreements to Offa under such a system, which would represent a significant increase on the ?6,000 cap on state-subsidised student loans that applies to for-profits in 2012-13.

The move could create price competition at the "premium" end of the market, while further education colleges could do the same lower down the scale, it has been argued.

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However, others contend that the coalition's drive for competition is flawed, as further education colleges operate in niches and private providers are not structured to create extra student places.

Offa announced that by its 20 April deadline, 17 further education colleges had submitted access agreements for 2012-13 indicating that they plan to charge fees above ?6,000. For 2011-12, 66 further education colleges submitted access agreements to charge above the current "basic level" of ?1,345.

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That leaves 49 colleges offering higher education courses that will not charge above ?6,000 in 2012-13. Some observers believe this presages competition between further education colleges and "low-ranked" higher education institutions.

Leicester College expects to charge less than ?6,000 for full-time higher education courses in 2012-13, while Bradford College will only just breach the threshold at ?6,700.

But Andy Westwood, chief executive of GuildHE, said: "The whole assumption that further education can be this great competitive force in higher education does not quite hold water."

Mr Westwood said the colleges tended to offer "distinctive" higher education provision - in specialised occupational courses or where there is no university nearby - rather than competing on more general terms.

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He also pointed out that many of the colleges not submitting access agreements for 2012-13 may offer only foundation degrees.

On private providers, he said: "If you look at their business models, while they do recruit UK students, the vast majority are (focused on) international students."

Others question whether BPP University College, a private provider in law and business, could increase student places as its courses use employer-provided work placements.

There is also little indication that private providers are expanding into new subject areas, which would require the significant injection of fresh academic blood.

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About 4,000 higher education students receiving tuition fee loans are currently enrolled at private providers.

john.morgan@tsleducation.com