The Education Maintenance Allowance (EMA) contract held by IT services firm Liberata has been discontinued by the Learning and Skills Council (LSC).
Outsourcing company Capita will take over the contract, including the helplines, processing and payments services, on 28 November.
The EMA contract delivers an allowance to approximately 600,000 teenagers from low-income families as an incentive to continue their education. The LSC has announced that at one point, over 200,000 applications were in backlog, and tens of thousands of students still have not received their EMA grant, two months after it was due.
"We have said throughout that it is unacceptable for young people to have their EMA payments delayed," said Mark Haysom, chief executive of the LSC.
"We are working with Liberata and Capita to make the transfer as smooth as possible. Although the transfer will not immediately fix all of the helpline and processing problems, it will help us to improve the future service for young people, colleges and learning providers," Haysom said.
Capita, who has been appointed a contract worth more than one million pounds each month, is to bring in new senior management to oversee staff and operations in processing centres.
Remaining applications are to be cleared within the next few weeks, ensuring students that they will continue to receive payments during and after the transfer of companies.
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