One of Australia's biggest private colleges, Careers Australia, will give up at least $160 million in government funding after admitting it broke consumer law by using "false or misleading representations" to enrol students and sign them up to a government loan scheme.

The college has made a court enforceable undertaking to the Australian Competition and Consumer Commission to cancel the enrolments of students who were misled and repay the tuition fees received from the federal government.

The deal is the first that will see money returned to the federal government for VET FEE-HELP loans, which were exploited by colleges that enrolled tens of thousands of unprepared students into courses with inflated fees paid by the government through the loan scheme. Even though most students did not complete their courses, the colleges were entitled to keep the fees and students still owed the debt.

Consumer watchdog chairman Rod Sims said the college had taken government money for courses that were not delivered. Michael Clayton-Jones

The ACCC said in the period from August 1, 2013 to March 1, 2015, Careers Australia channelled 40,000 student applications to the VET FEE-HELP scheme whose fees, worth $300 million, would have been paid by the federal government, later to be repaid by the students.

Under the terms of the undertaking, Careers Australia will give up its claim on $110 million of this money and the government will cancel student debts.