The Australian Skills Quality Authority has threatened to remove the registration of the Australian Institute of Professional Education, throwing thousands of students' plans into disarray. The college is challenging the preliminary decision.

The move comes as the administrators of Vocation Limited, another player in the troubled private education industry, stopped all operations, throwing150 staff out of work.

AIPE's chief executive and owner, Amjad Khanche, told a Senate committee earlier this year that his Sydney-based college represented the best of the industry.

"Sadly, I understand that the behaviour of a number of bad apples in the VET sector continues to plague the reputation of all VET providers," Mr Khanche told the senate education committee in July.

"I am deeply disappointed that the behaviour of those providers compromises the standing of providers like AIPE, which is committed to offering our students the very best [vocational education and training]."

The industry representative body, the Australian Council for Private Education and Training (ACPET), which fronted the committee the same day, described Mr Khanche's evidence as "particularly compelling, as was his description of the difference between a Mercedes and Toyota in describing education choices! Well done!"

AIPE has been paid $104 million in Commonwealth funding already this year under the controversial VET FEE-HELP scheme, on top of $110 million last year, making it one of the largest private colleges in the country. Despite the huge money paid, however, only 117 students graduated in 2014.

Mr Khanche is seen as one of the most successful college owners in Sydney and AIPE has a large campus on Sydney's Sussex Street. It has received numerous awards, including being a finalist in the 2015 NSW Premier's export awards.

But last week the industry regulator, the Australian Skills Quality Authority threatened to cancel AIPE's registration as an education provider for being "critically non-compliant" with regulations.

Among the complaints was that students were enrolled in courses "without their knowledge or permission". Despite being given time to fix the problems, an audit found problems with "student recruitment and monitoring of recruitment by third parties, provision of learner support, assessment, marketing ... and consumer information regarding fees and payment terms".

The college has until Wednesday to respond.

Fairfax Media has reported that door-to-door salesmen sign up vulnerable people, including those on welfare and people living on Aboriginal missions, to vocational colleges, charging around $20,000 for an online diploma.

It's alleged that some salesmen get the students' tax-file numbers and other identification as part of the process, then sell those details to other brokers.Those people then use the details to sign students to a second college, generating a payment to the broker, and to the college. The first the actual student hears of it is when they get communications from the college. Some may not find out until they see the debt on their tax records.

Paul Wiggett, 19, a welfare recipient who cannot read or write, found himself signed up to an Events diploma at AIPE after first being sold a different diploma from Melbourne's Phoenix Institute. He did not know about the second college until AIPE sent him a package of goods (including a bag and a cap) through the mail. He subsequently withdrew from the course.

The Commonwealth pays private vocational colleges the full cost of each diploma course they can sell, which generates a debt that the student must repay to the government. Like HECS, these debts are paid back through the tax system once the "student" earns more than $54,000.

The Australian Competition and Consumer Commission has launched action against two colleges, with more to come.

AIPE has a number of brokers, the largest being Robby Singh Sawhney, of Online Study Pathway Australia, or OSPA. He is also a registered migration agent.

AIPE has blamed the salesmen for problems, saying that its "experience with some third party providers has taught us that some unscrupulous brokers and agents do not have the students' best interest at heart". It said in a statement it had cancelled "most of" our external contracts.

Rod Camm, the chief executive of the industry body ACPET, said his organisation had sought an explanation from AIPE - a member college.

"We do not want any poor behaviour in this marketplace. The marketplace cannot sustain poor behaviour," he said.

Meanwhile Ferrier Hodgson, the administrator of former listed provider Vocation Limited, said the "lack of available liquidity to fund operations" meant the college's operations would shut down immediately. The only parts of the business worth selling are one of its colleges, the Customer Service Institute of Australia, and its intellectual property.