The chief executive of the beleaguered Student Loans Company resigned yesterday after the Government made it clear it had no confidence in him.
Ralph Seymour-Jackson resigned after the new Universities minister, David Willetts, indicated he should go, the Department for Business, Innovation and Skills (BIS) said. Mr Willetts also asked John Goodfellow, the chairman, to leave.
The dramatic moves followed a fresh assessment of the company which concluded there were still causes for concern in the way the body was run.
Last year tens of thousands of students suffered months of delays to their loan and grant payments, leading to an inquiry which reported that there had been "conspicuous failures which had a far-reaching impact on students".
A spokeswoman for BIS said: "Mr Willetts asked Mr Goodfellow to step down and indicated while it is a decision for the board, he had no confidence in Mr Seymour-Jackson."
An inquiry into the SLC which was commissioned by the previous government and published yesterday, said it was "surprised by the lack of focus and urgency" in addressing issues raised in the original report.
Of an anticipated 880,000 applications for loans this autumn, only 264,000 have been registered, with 114,000 being processed for payment. Yesterday's report also found the SLC's call centres were short of 100 staff needed to meet call targets at the peak of applications.
This year is expected to see a record number of applicants for places as a result of the economic climate. "Last year the service fell short of what students and their parents had every right to expect," said Mr Willetts. "While improvements have been put in place since last year, we are not out of the woods yet."
He added: "Having read the latest report on the SLC by PricewaterhouseCoopers, it is clear urgent changes to the leadership are needed to ensure students get the service they deserve."
Business Secretary Vince Cable said: "We must avoid a repetition of the problems," adding that last year's "crisis" had "caused real upset for students and their families, many of whom lost confidence in the system".
Sir Deian Hopkin, the former vice-chancellor of London South Bank University and the man who carried out last year's inquiry, has been appointed chairman in Mr Goodfellow's place.
Last night the National Union of Students welcomed the departures – saying it had long held the belief that there was a need for changes at the top of the company.