Just 12 months after hundreds of thousands of undergraduates were left without money for rent and books following the collapse of the student loan system, there are fears of a new wave of problems.

People applying for loans and grants have reported weeks of delays as the Student Loans Company (SLC) deals with a backlog of forms, fuelled by a record number of university applications.

Many students have complained that documents they sent to support their application have been lost or mislaid, raising the prospect that their funds will not be approved by the time they enrol in September.

The SLC last night insisted there would be no repeat of last year’s fiasco, but conceded that it faced an “uncomfortable” few weeks after A Level results are published next Thursday.

Tens of thousands of teenagers who delayed applying until receiving their grades may find they struggle to get their funding requests processed by the start of the academic year.

The SLC is sufficiently concerned to have created a new scheme that will allow students who fail to provide all the necessary documents by the start of term to receive three-quarters of their maintenance grant anyway

The National Audit Office (NAO) has warned there is a “substantial risk” that some students will face delays similar to those of 2009.

A spokesman for the University and College Union, which reprsents lecturers, said renewed problems would be "deeply embarrassing" for the SLC, while the National National Union of Student warned of the "catastrophic" consequences for students.

Aaron Porter, president of the NUS, said: "If the processing of applications is not up to scratch when A-level results are released next week and the scramble for university places begins, students and their families will demand immediate answers as to why their aspirations to enter university are being frustrated by incompetence.

“Avoidable delays and loss of the personal documents undermine confidence in the student finance process and contribute to anger and anxiety at an already highly stressful time. Any repeat of the catastrophic delays that affected tens of thousands last year will be of huge concern to students and their families."

Dozens of potential undergraduates have contacted The Daily Telegraph and posted messages on internet forums to complain about the delays they have faced trying to secure money this year.

Louise Bradford, 19, from Thanet in Kent, was told there was a seven week backlog when she called to chase up her application for funding to study Education and Psychology at the University of Greenwich. She first submitted the application in March.

SLC staff twice blamed errors on her form for the delay, before admitting that they had accidently returned documents relating to her parents’ financial situation without looking at them.

She has now been told that she will not receive her loan until after she moves into student accommodation in London.

A 22-year-old drama student from Newcastle, who asked not to be named, said her application was held up after she was given contadictory information by four different SLC advisers.

She said: “There was a complete lack of communication. It was like jumping through hoops. It was completely ridiculous.”

Other students claim the loans company denied receiving documents sent recorded delivery, even though they were in the same envelope as forms they did acknowledge.

The damning NAO report into last year’s scandal led to the departures of John Goodfellow and Ralph Seymour-Jackson as chairman and chief executive of the Student Loans Company in May

Ed Lester was appointed at interim chief executive to turn around the quango, which has hired more than 520 extra staff to process applications and deal with telephone inquiries.

He insisted yesterday that the SLC was in a “much better place” than last year, and had contingency plans to deal with students who find themselves in pressing financial difficulty.

By the start of the 2009 academic year the quango had processed just 43 per cent of applications. This year, 63 per cent of applications have already been approved. Of those outstanding, 103,000 require further information to be supplied by the student, while 37,000 are classified as “works in progress”.

Mr Lester said: “We are still yet to receive around 160,000 applications and it may be uncomfortable for a week or two, but I believe that we have made the changes we need to make to manage that sort of number.

“Clearly when you have dealings with 800,000 people there are going to be some cases which are more complex than others. But the vast majority of people who have done what we have asked of them – by filling out forms correctly and sending in all the evidence required – will get paid in time.”

David Willetts, the universities minister, said: “The government has made clear that a repeat of last year’s performance is unacceptable. My department and I are close in contact with the Student Loans Company and continue to monitor processing over the busy summer period.

“A new senior management team is in place and is overseeing improvements to the service. This includes putting more staff on processing and on the phones and improved information and services on the website.”

The SLC expects to receive a total of 840,000 funding applications this year, although some will only be submitted after the start of term. The number of people applying to university for the first time is expected to be 16.5 per cent up on last year – representing an extra 80,000 applicants.

Last year’s problems stemmed from bureaucratic changes which saw the SLC take over responsibility for administering student grants from local education authorities. Previously, the SLC had dealt solely with loans.

Source: Telegraph.co.uk