Baroness Blackstone, the minister responsible for higher education, said there was no reason for students and parents to worry about loan payments, which will cover all student living expenses for the first time this year.
Hundreds of thousands of students could face severe delays in collecting their maintenance loans this autumn after local authority leaders claimed computer software designed to calculate parents' incomes had arrived late and was riddled with errors.
The problems, which come after computer failures caused huge delays in issuing passports, could severely damage the Government's controversial system of university tuition fees and student loans to pay for students' maintenance, which comes into force in full for the first time this autumn.
The Independent on Sunday revealed that memos from the Department for Education to local authorities had admitted there were problems with the new system for calculating the means test.
"There is not reason to believe that any authority will be unable to deal with students' applications," Lady Blackstone said. "There's not reason for students or parents to worry."
But student leaders and local authorities said the problems represented a crisis waiting to happen in October if students arrived at university without money for fees and accommodation.
Under the scheme, students must pay means tested tuition fees of up to pounds 1,025 a year and are eligible for loans, also means tested, to cover living costs. But the system hinges on the ability of local authorities to provide details of means tests in time for the beginning of term on 1 October.
The problem is exacerbated this year because, for the first time, no new students will be eligible for student grants. Last year, as part of efforts to phase in the new system, first-year students got partial grants.
Graham Lane, education chairman of the Local Government Association, said council leaders warned Ministers of the potential problems as early as March. He said councils were anxious not to get the blame for any problems.
"There is a grave danger that we are not going to have the information we need, universities will not have the information they need and there will be chaos at the beginning of term," Mr Lane said. "This is a wonderful example of why ministers should not listen to people who know about computers. Awards officers have been tearing their hair out for some weeks. We only have until the end of July to get this right.
"What students need on the first of October is the money to pay their bus fares and buy their lunch. I'm not saying that everything cannot be fixed, but I am saying that everything is not hunky dory."
The Student Loans Company attracted fierce criticism last year after student leaders claimed some loans were not paid until Christmas, two months after the start of term.
Andrew Pakes, president of the National Union of Students, warned the fees and loans system would collapse if means tests were not produced on time. "A lot of people waiting for their A-level results will be very worried. I don't want this to turn into another fiasco like the passport agency's problems," he said.
"The Government needs to come up front with a statement so students and admissions officers know what is happening."Reuse content