Student finance service Duo did “indirectly discriminate” against youngsters with an ethnic minority background via its fraud strategy, advisory group PwC said in a report for the education ministry on Friday.

The scandal came to light last June when broadcaster NOS and news website Investico said students with ethnic minority roots were “noticeably more often” accused of student loan or grant fraud than other students.

NOS and Investico spoke to 32 lawyers who had represented students accused of lying about where they lived. Of the 376 cases the lawyers were involved in, 97% involved students with ethnic minority roots. The figures were “shocking”, law professor Gijs van Dijck told Investico at the time.

Students who live away from home are entitled to a higher grant and between 2012 and 2023, almost 27,000 students were visited by officials to check up on where they were living. Almost 10,000 of them were actually accused of fraud.

Duo has used an algorithm to look for potential fraud since 2012 based on potential risk indicators such as age and education, and trained using the “experience” of Duo investigators. Once a suspect has been identified, Duo fraud investigators decide if they should be checked out.

For example, youngsters who live with family members, such as a brother or aunt, form a potential risk, even though they are entitled by law to a grant as a live-out student – some €200 more a month than for home students.

Vocational college students were also considered to be more likely to commit fraud.

The claims were so serious that education minister Robbert Dijkgraaf commissioned the “far-reaching” investigation into the way student finance body Duo carried out the checks. He also called a halt to use of the algorithm.

PwC concluded that the system used by Duo had led “indirectly” to students with ethnic minority roots facing discrimination – not on the basis of their background but on the basis of other boxes on the check list.

Vocational college

However, Duo civil servants themselves played a part in the discrimination because of the way they decided which students should be looked at it more detail, PwC said. They would therefore, the report said, carry out more checks in areas where a relatively large number of immigrants lived.

Since 2015, student grants have only been available for students from low-income households and students at vocational training colleges (mbo) but they are being reintroduced for all students this year.

Dijkgraaf has apologised to students who were wrongly accused of fraud and said the government had shown shortcomings in the way it carried out the checks.