The student support system administered by universities is open to fraud, according to its administrators.
Officers from around the country, who preferred to remain anonymous, said they could not guarantee that the £87 million budget was going to the right people.
"Universities don't have powers of investigation to detect fraud, unlike local education authorities, and you get a recipe for errors, miscalculations and criminal activity," one officer said.
Prime minister Tony Blair has indicated that the government may review the system.
Rosalind Street-Porter, chairwoman of the Association of Managers of Students Services in Higher Education, said the system needed a review. "It has got out of hand and acts against widening participation," she said.
Lindsey Fidler, research officer for financial support at the National Union of Students, said: "The NUS has long called for the return of statutory but targeted grants administered through local authorities."
Ailsa Blair, head of a group for education, culture and tourism at the Local Government Association, said: "I sit on a policy group that links the Department for Education and Skills and local authorities. There has as yet been no talk of a policy review at that level."
She said: "Local education authorities are reviewing how fees and loans are means-tested, in the hope that information on tax and housing can be centrally collated to make the system more efficient."
Universities means-test and hand out opportunity bursaries and hardship funds. Local education authorities means-test students on fees and their loan entitlement on behalf of the DFES, with the Student Loans Company paying out the money.