The Treasury should transfer Pounds 600 million from the social security budget into direct support for college students, the government's advisory group for further education student support will tell ministers when it reports next week.
The cash, said advisory group chairman Graham Lane, is "a huge sum of money which is going to the wrong people", and should be transferred to a new student support fund. The group's report, which will be presented to ministers on March 31, will criticise the payment of Pounds 600 million in child benefit to all parents with 16 to 18-year-olds in full-time education.
"Why should the parents of children going to Eton and Harrow get this child benefit?" said Mr Lane, who is also education chairman of the Local Government Association.
In opposition, Labour had pledged to axe the 16-19 child benefit, but in last week's budget chancellor Gordon Brown said child benefit would "remain universal".
Mr Lane said that the House of Commons education select committee, in its report on further education funding, "will be making the recommendation too".
The Pounds 600 million, said Mr Lane, would increase spending on student support from about Pounds 400 million to Pounds 1 billion. With the extra money, a new universal "minimum entitlement" to support, one of the group's key proposals, could be about Pounds 150 per student, he said, with "means-based top-up grant" for the poorest students.
Mr Lane proposes to abolish the discretionary grant, and end local authorities' absolute discretion in awarding student support. He said that under the present system, students seeking financial help faced "terrible inequity".
The group will propose that 1 per cent of local authorities' education budgets be ringfenced for further education student support, securing a Pounds 200 million budget.
He believes the Treasury is prepared to match this with new money, bringing the total spend, without the Pounds 600 million from social security, to Pounds 400 million.