A report from the National Audit Office has warned that the student loans and grants system in England is at substantial risk of being hit by delays again this year.

According to the National Audit Office, it is anticipated that the Student Loans Company will have to process twice as many applications this year, but there is no guarantee that it will be able to cope with the  demand.

Last autumn tens of thousands of students faced delays before receiving their grant and loan payments last autumn after the Student Loans Company struggled to keep up.

The National Audit Office’s report on last years shambles found less than half of applications (46%) were fully processed by the start of the academic term last year, compared with 63% in 2008.  Applications had been arriving faster than the Student Loan Company was able to process them, and by September 6 there were 241,000 applications that had not been fully processed.

When the start of term approached, the report found that calls from students enquiring about their applications rose, with four million made to the Student Loan Company last September, and in spite of having a target of no more than 14% of calls being abandoned, 87% were left unanswered during the month.

Between February 2009 and January this year, only a fifth (21%) of calls were answered in 60 seconds, and more than half (56%) were left unanswered.

The findings showed the SLC took 33% longer to process an application in the 2009/10 academic year, than it had taken local authorities in 2008/9, and on average, it took 12.4 weeks for an application to be processed in 2009/10, compared to 9.3 weeks in 2008/09.

The SLC took over processing applications by new students from local authorities for the first time in 2009, for the academic year 2009/10, but the report was criticised the Student Loans Company and the Department for Business, Innovation and Skills (BIS), saying they had underestimated the challenges of centralising the service.

This year, the SLC will handle applications from students starting university this autumn, as well as continuing to deal with applications from students who started last year.

The report concludes:

“The company expects to process at least twice as many applications in 2010, when it becomes responsible for applications from both first and second years, and it is unproven whether it has the capacity to provide a good service this year.”

A spokeswoman for the Department of Business, Innovation and Skills said:

“We welcome this report which provides further background to the processing issues at the Student Loans Company (SLC) last summer. As soon as the department became aware of the problems, both ministers and officials acted immediately including making more resources available.

“Last year we commissioned Professor Sir Deian Hopkin to carry out an independent review of the lessons learned and the SLC and the Department fully accepted the recommendations in the report and are implementing them.”