The National Audit Office (NAO) has warned the student loans and grants system is at “substantial” risk of being hit by delays again in 2010.
Last year, almost a quarter of a million students were left without cash prior to the start of term, as a new system resulted in delays.
The student loans system plunged into crisis after the Student Loans Company (SLC) acquired the processing system of all England’s student applications for grants and loans for the academic year 2009-10 from local authorities.
Ministers thought a centralised service would be more cost efficient in the long-term but has since ordered a “health check” of the firm’s capacity to deliver.
In a report published today, the NAO discovered that 46% of applications were fully processed by the start of the academic year, compared to 63% in the previous year.
By September 6, just days before the start of term, around 241,000 applications were not fully processed.
The report also established it took, on average, 12.4 weeks for an application to be processed in 2009, compared to 9.3 weeks in 2008.
The report said: “Crucially, the company did not sufficiently understand its customers, many of whom are inexperienced young people who need guidance.”
As a result, the NAO said the Student Loans Company (SLC) provided an “unacceptable” service last year.
There are now concerns that the SLC will fail again this year and the NAO has questioned whether the firm could handle a doubling of the number of student finance applications this year.
SLC chief executive, Ralph Seymour-Jackson, said: “We deeply regret the problems that students experienced last year.
“This was the first year of a three-year process to centralise student finance in England and I would like to reassure students and parents that lessons have been learned,“ he added.
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