As Pakistanis exploited the hole in the immigration system, it allowed in hundreds of youths from Pakistan's militant heartland to register themselves as students at a network of sham colleges, The Times newspaper said on Thursday.

Eight of the ten Pakistani students arrested last month during anti-terror raids in Manchester and Liverpool were enrolled in one college (Manchester College of Professional Studies between November 2006 and October 2007), which had three small classrooms and three teachers for the 1,797 students.

All were released without charge but are being held in prison pending their appeals against a deportation order.

Another institute claimed to have 150 students but secretly enrolled 1,178 and offered places to a further 1,575 overseas applicants, 906 of them in Pakistan, the report said.

The fraudsters, who have earned millions from the scam, charged at least 1,000 pounds for admission and fake diplomas. They created their own university to issue bogus degrees, the British daily said.

According to the finds of the British paper, they also charged 2,500 pounds for false attendance records, diplomas and degrees that were used to extend the students¿ stay in

Britain.

Between 2002 and 2007, the number of Pakistanis with permission to enter or remain in Britain on student visas jumped from 7,975 to 26,935.

Mir Ahmad, a wealthy associate linked to two murders in Pakistan, was arrested on Wednesday after the daily gave the authorities documents implicating two of the colleges.

The Times has uncovered close ties between 11 colleges in London, Manchester and Bradford, all set up in the past five years and supervised by three young Pakistani businessmen.

Manchester College of Professional Studies, set up in 2006, sold places to more than 1,000 students, including hundreds of men from the restive North West Frontier Province, which is know to have become a safe haven for Taliban and al-Qaeda militants.

The UK Border Agency introduced tougher laws last month to weed out bogus colleges and close the immigration loophole.

Phil Woolas, Britain's Immigration Minister, has said the information provided by The Times "has been passed on to the UK Border Agency, which is investigating."