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A government-backed loan scheme has been heavily criticised after failed and fraudulent companies left students with no tuition and millions of pounds worth of debt.

The Career Development Loan (CDL) scheme allows students to borrow interest-free loans if they train with one of 2,000 companies registered by the Learning and Skills Council (LSC). However, more than 100 of the companies have gone out of business, leaving students with huge debts but no tuition.

An all-party education committee is set to investigate claims that the government should have vetted the companies taking part in the scheme, the Guardian reports.

Committee chairman Barry Sheerman confirmed: "We are going to be asking some probing questions about this."

Colin Steed, chief executive of the Institute of IT Training, mirrored the views of many students when he said: "the fact that the council has no quality control over its learning providers is appalling."

Trevor Fellowes, the LSC's director of learner support, has angered many caught out by the disreputable companies by insisting it was up to the student "to ensure the provider and course satisfy their needs".

Around 17,000 students take out Career Development Loans each year. The LSC insists that 85 per cent of participants in the scheme would recommend it to others.