Ongoing IT problems have been blamed for the continuing delays in processing student loan applications earlier this year.
A highly critical report from the House of Commons Public Accounts Committee (PAC) cited delays and increased costs in the IT programme, which led to "completely unacceptable" performance problems in processing applications and communicating with students during 2009 many of which continued into 2010.
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By the start of the first term of the 2010-11 academic year, 26% of students had still not received payment of their loans, which was only a "limited improvement" on the 2009 figure of 34% of applications not processed.
Estimates of £14m for IT systems ballooned by more than £10m, and new contact centre technologies that had been promised by the Student Loans Company (SLC) had still not been delivered by October this year, resulting in a further budget increase from £4.6m to £11m, said the MPs.
"The programme has been dogged by significant delays and cost overruns, notably IT systems," says the PAC report.
"The plans for achieving financial savings of £20m a year from 2011-12 have slipped to 2012-13, and it now considers that these savings might be delayed further and possibly reduced."
Among the other IT problems experienced by the company was a failure to implement a change to allow students to reset their own passwords on the loans website. The report says that SLC told the auditor general that it had taken seven months to introduce this change, but it was not yet working at the time the PAC heard evidence as part of its inquiry.
"The failure to resolve this issue in 2009 led to high volumes of calls to the contact centre from students who could not access their application details; in the first half of 2009 this was the single most common reason for calls to the company," says the report.
The report says the root cause of the problems that existed in 2009 and 2010 was a failure to properly test the SLC's document scanning system, described as "the catalyst for the failure of the entire system."
"The company did not adequately test its document scanning system before going live, and could not cope when the system subsequently failed," says the PAC report.
"The scanning system is crucial to the timely processing of applications and the Department [for Business Innovation & Skills] should assure itself that the company now has robust contingency plans for maintaining an effective service in the event that the scanning system, or other aspects of its IT, fails again."
The MPs also highlighted the failure of the Office of Government Commerce (OGC) Gateway project monitoring process to identify the problems in the implementation and operation of SLC's Customer First programme.
"The failings in the design and execution of the Customer First programme have been seen in other programmes sponsored by the Department and more widely across other government programmes which are delivered by arm's length bodies. These include weaknesses in management information, target setting, testing IT systems, piloting, risk management and departmental oversight. We are particularly concerned that in this case the OGC Gateway review process did not surface the problems," says the report.
"The Cabinet Office Efficiency and Reform Group should examine the operation of the OGC Gateway process in this case to see if improvements can be made to ensure it operates as intended and provides early notification of problems."