The performance of the Government agency set up to deliver grants and loans to students was "completely unacceptable" in its first year and improvement since then has been "disappointing", a scathing MPs' report said today.
The House of Commons Public Accounts Committee (PAC) said it was "disappointed and concerned" that no officials appeared to have been held to account for the way in which the Student Loans Company let down undergraduates in its first year of operation, 2009.
Committee chairman Margaret Hodge said there needed to be a "step change" in the Company's performance if it was to deliver the "substantially better" service to which students are entitled.
The Company - which is an arm's length public body overseen by the Department for Business, Innovation and Skills (BIS) - is taking over responsibility from local councils for delivering grants and loans in England.
In 2009, when it handled only applications from new students, it took a third longer on average to process them than local authorities had done the previous year, said the PAC in a report published today. By the start of term, fewer than half were fully processed.
The Company answered fewer than half of the phone calls it received over the year, and in the month of September - when cash-strapped students were desperately trying to sort out their finances as they began their university careers - some 87% of calls went unanswered.
Disabled students "suffered disproportionately" in 2009, as the Company devoted too few staff to processing their applications.
By 2011, the Company is due to be responsible for applications for grants and loans from all students in England.
But during 2010, the rate of improvement in the Company's performance was "disappointing", with just 69% of loan and grant applications finalised by the start of term in September.
A quarter (26%) of applications were not sufficiently processed for students to receive even an interim payment by the start of the first term, found the report.
"Uncertainties remain over the Company's ability to deliver and maintain a service that provides value for money," said the cross-party committee.
And BIS came in for criticism too, with the report finding that its risk management and performance monitoring were "severely wanting". The Department "underestimated the risks in centralising the service" and there was poor communication with the Company.
"The failings in this service highlight wider weaknesses in the Department's oversight of its devolved services," said the PAC. "We are disappointed and concerned that responsible officials appear not to have been held to proper account for their failures."
Ms Hodge said: "There must be a step change in the performance of the Student Loans Company if students are to receive the efficient, effective, value for money service to which they are entitled.
"The first year of the new system was chaotic. By the start of term in Autumn 2009, fewer than a half of loan and grant applications from new students had been fully processed. The Company failed to communicate about the problems with students. The worst point was in September 2009 when nearly nine-tenths of telephone calls to the Company were left unanswered.
"Many students had to do without their financial support for weeks if not months. For students with disabilities the failures were even greater.
"The Department also failed in 2009 to manage and monitor the programme effectively. Even as serious problems emerged, officials did not take prompt action. We are disappointed and concerned that no official seems to have been held to proper account.
"The Company has improved its performance in 2010 but not by enough and we shall return to this issue in Autumn 2011 when we shall expect to see a substantially better service."
Universities Minister David Willetts said: "The weak performance of the Student Loans Company in 2009 under the previous administration was completely unacceptable.
"The new Government acted quickly, replacing the company's senior team and making clear our expectation for substantial improvements for students taking out a loan last summer.
"There is no room for complacency. We will continue to work closely with the SLC to ensure students and their families get the service they rightly deserve."
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