The government is still not dealing adequately with bogus colleges which supply fraudulent student visas, says a report by the home affairs committee.
MPs on the committee said tens of thousands of foreign nationals may have entered the UK illegally in this way.
In a critical report, they said the word "college" should be restricted to institutions accredited by the state.
The government said new regulations meant only genuine foreign students could now obtain a visa.
The MPs said they were "extremely disappointed" that the government had ignored repeated warnings from the education sector about the problem of bogus colleges.
Since March this year, there has been a more tightly controlled register of institutions which are allowed to recruit students from outside the EU.
The committee found that around 2,200 colleges were not transferred to this new list, and it said it suspected a significant proportion of these were bogus.
The new points-based register now contains around 1,500 colleges, which must be accredited and also inspected by the UK Border Agency.
The committee welcomed this "more effective" regime, but said it was "deeply concerned" that the agency was giving colleges notice of its inspection visits.
It said ministers had been very slow to act when warned about the whole problem, and that this was "unacceptable".
Its report said: "Firm enforcement action must be taken against any individual whose student visa has expired to ensure that they leave the country, as well as against those who have set up bogus colleges to perpetrate visa fraud.
"We have received no evidence that the Home Office has made adequate preparations to deal with this issue."
It went on: "While the new sponsorship system under the points-based immigration system should help to prevent bogus colleges, we consider that a more complete means of prevention requires the compulsory regulation of private further education colleges and English language schools by the state."
Committee chairman Keith Vaz said: "Bogus colleges may have allowed tens of thousands of foreign nationals to enter the country illegally.
"The government has been aware of their existence for 10 years and done nothing to stop them.
"This is totally unacceptable and frankly, quite unbelievable."
He said immediate action was needed: "The government must restrict the term 'college', to prevent any premises above a fish and chip shop from being able to claim it is a reputed educational institution."
The MPs said this would protect students from coming to sub-standard, unregulated places.
But they did not find any substantial evidence of the alleged link between bogus colleges and terrorist activity.
Immigration Minister Phil Woolas said: "No institution can bring students into the country unless we are satisfied they are genuine - this includes approval by an accredited body, and assessment of their premises, courses and teaching staff.
"Since April, the UK Border Agency has carried out nearly 100 unannounced checks on institutions throughout the UK and they are doing more every week."
"Before we tightened controls around 4,000 UK institutions offered courses to foreign students, but under the new system only around 1,600 can currently bring students into the country from outside Europe.
"We have already rejected over 500 establishments' applications."