Millions of university students are at risk of being left without government-backed loans because of ageing technology that is close to collapse at the student finance quango.
Bridget Phillipson, the education secretary, has ordered the Student Loans Company (SLC), which insiders complain is “dogged by inefficiency”, to overhaul its IT systems as part of a crackdown on quangos to reduce bureaucracy.
Out-of-date technology means up to 45 per cent of staff are performing tasks that the Department for Education (DfE) believes could be done better by computers and artificial intelligence.
Officials manually input data and move it between eight separate IT systems. Six of these run on technology that is no longer supported and is neither compliant with data protections law nor cybersecure.
These systems are at risk of “critical collapse”, which would leave millions of students without finance and put their personal data at risk, sources said.
Failure to modernise processing by the SLC has led to costs rising by 60 per cent in four years, from £160 million in 2019-20 to £255 million in 2023-24, as more people apply for student loans.
A government audit found that of its 3,300 staff across four sites — in Darlington, Llandudno and two in Glasgow — 45 per cent of SLC staff are paid within 2 per cent of the national living wage to manually perform administration tasks.
• Universities call in consultants to stave off collapse
Phillipson believes many of the tasks could be done automatically, reducing costs and potentially leading to a need for fewer staff.
Modernising IT systems could also increase revenue raised by the SLC to £145 million over five years, the DfE believes, in part by making it easier for students to repay loans faster.
She has kicked off an effort to streamline the SLC, as one of 18 of the arm’s-length bodies run by DfE, to redirect money to frontline education services. Phillipson is said to be keen on reducing the number of quangos covered by DfE, which has risen by eight since 2010.
As departments brace for painful cuts in the spending review, which will be unveiled in June by the Treasury and set budgets across Whitehall for the next three years, Phillipson is keen to tackle waste.
A government source said: “The education secretary thinks that nothing is more important than delivering for children and families through our Plan for Change. She wants to build nurseries, schools and colleges ready for the 2030s — that’s why she is taking an axe to bureaucracy from bygone eras with upgraded tech, so money can be put where it’s needed.
“For more than a decade the Tories did nothing to reform education and created ever more bloated quangos — by contrast Bridget Phillipson is working to put more cash into delivering high and rising standards across a reformed education system.”
It is the latest move in a campaign to reduce the sprawl of bureaucracy across Whitehall, by reducing the size of arm’s-length bodies or bringing them under direct ministerial control.
