Universities have been told to prepare to tap into their emergency "access" funds, reserved for helping students in severe financial hardship, to pay for rent and food for those who will not receive their cheques.
The crisis, which follows huge delays caused by computer failures in the Passport Agency and in processing asylum claims, will exacerbate growing poverty among students.
The Government's timetable for assessing whether students are eligible for student loans and tuition fee payments is months behind schedule. New software to process the new criteria, which councils say could take up to six months to get up and running smoothly, has only just arrived.
Councils say the software is full of errors and that, because it arrived so late, they will have only a week to test it. Art present it is incapable of recognising "UK" as a valid response to the question on a student's country of origin.
The Department for Education and Employment (DfEE) promised councils that it would set up an emergency fast-track procedure to cope with the crisis. But even that is three weeks late.
"This is the passport nightmare all over again. Everything that could be delayed has been delayed," said Cllr Edward Lister, Tory leader of Wandsworth Council. "We have had to install an entirely new system for assessing loans and there is a big problem with the software. The Department for Education has saddled local authorities with an unworkable system."
One Labour local education authority said: "We are being asked to do in three days what it takes six months to complete. We really need to test this new software system but we are not being given the time."
The crisis has arisen this year because of major changes in how student finance is calculated. Most student grants have been replaced with student loans. More than 100 councils are having to use new rules for means-testing loans and tuition fees. The DfEE sent out the new rates for grants, loans and tuition fees five months later than promised. The Student Loans Company, which gives students their money at the beginning of term, has only received a fraction of the forms it needs to start making checks on students.
"We have been ready for processing forms from mid-May; that was when they were due. They haven't come through on the timetable set up by the Department for Education," said a spokeswomen for the SLC.
Luton Borough Council, which is working against the clock to input the data into the new software system, has set up an emergency action plan to make sure students get at least some money on the first day of term.
"This is the first time this delay has happened. We have had problems with the new regulations and the new software," said a spokesman. "Our people are working hard to make sure that delays are minimised."
The Government has in recent weeks begun bombarding LEAs with up to seven memos a day to help them speed up the process.
But opposition MPs say that the Government should take responsibility for the impending crisis in student finance. "These delays are due to government incompetence. Students are finding it hard enough to cope with the introduction of tuition fees and now we could end up with a serious crisis at the beginning of term," said Theresa May, Shadow Education Secretary. "This will mean that students who really need university hardship grants will lose out."
The Government publicly insists that "all students will get their cheques on time", but DfEE memos to local councils admit that that "there are problems out there".
"It is our firm expectation that students will get paid on time," said a spokesman for the DfEE. " On the first day of term if there are problems there will be access funds available. The access money is for people under a great deal of hardship. Under these new circumstances that would be useful."Reuse content