WIREDGOV

“The Department for Business, Innovation and Skills and the Student Loans Company underestimated, and therefore did not do enough to mitigate, the significant risks in integrating the student finance service previously carried out by 130 separate local authorities. Both bodies failed to grasp the magnitude of problems that were developing in 2009 as applications for loans, grants and allowances piled up and applicants struggled to contact the Company by telephone. In particular, students with disabilities were supported badly.

“The question must be asked how the Company, given its failure in 2009, will deal with twice as many applications in 2010, when it becomes responsible for applications from both first and second year students. The Department and the Company must give the highest priority to achieving a radical improvement in the service and, in so doing, to restoring the confidence of applicants and stakeholders. They will have to manage substantial risks.”

Amyas Morse, head of the National Audit Office, 19 March 2010

The service provided to students applying for finance in 2009 did not achieve value for money, according to a report today by the National Audit Office. There were major problems in the processing of applications - with fewer than half new applications being fully processed by the start of term - and in communications with applicants.

In 2009 the Student Loans Company took over the processing of loan and grant applications for new students from England which had previously been carried out by local authorities.

According to today’s report, the Company’s document scanning system was launched before being fully tested. Its failure was critical, and the Company’s contingency plan was both flawed and implemented late. The Company took 33 per cent longer to process applications in 2009-10 compared with local authorities in 2008-09, and only 46 per cent of new applications had been fully processed by the start of term. From February 2009, applications arrived more quickly than the Company could process them and, by September 2009, 241,000 applications had been received but not fully processed. This led to a dramatic increase in the volume of calls, with the Company receiving over four million in September – 87 per cent of which were unanswered. The Company had failed to communicate key messages to applicants that would have helped to reduce unnecessary calls.

The customer service provided by the Company in 2009 was poor. Half the students responding to an NAO survey said they had to send in the same paperwork more than once, while 17 per cent said the Company had told them it had lost some of their documents. Overall, from February 2009 to January 2010 the Company answered fewer than half of the calls to its contact centre.

The NAO has also raised concerns about the Company’s performance in managing Disabled Students’ Allowance. By the end of 2009, only 4,000 of 17,000 applications had resulted in a payment, taking an average of 20 weeks to be processed. For other ‘targeted support’ grants (Childcare Grant, Adult Dependants’ Grant, and Parents’ Learning Allowance), the Company does not collate information to measure how long it takes to process applications.

The Department for Business, Innovation and Skills and the Student Loans Company underestimated the challenges in centralising this service. Neither the Department’s monitoring of the Company nor the Company’s Board’s oversight were effective, the NAO has reported.

Substantial risks remain to the successful delivery of the service in 2010, which provides a focus for the NAO recommendations. While the Department and Company still expect to secure savings of around £20 million a year from 2011-12, this benefit would be outweighed greatly by continued poor service in administering over £5 billion of loans, grants and allowances.