Twenty students over the age of 16 currently have to travel to the mainland for their education because of the lack of courses at home. Most go to Cornish colleges but some travel to Bournemouth.
The council of the Scilly Islands originally gave Pounds 2,200 to pay for accommodation, with most of the students going into bed and breakfast.
However, after meeting the cost of a shipwreck in the area the council claimed it could no longer afford the payments and asked the Further Education Funding Council to take over. The FEFC offered to make the same payments.
But on November 4, parents met George Mudie, minister for lifelong learning, to argue that the money was insufficient and that the students were having to put up with intolerable conditions.
After 20 minutes, Mr Mudie halted proceedings and told the stunned but delighted gathering: "I hear what you say. Don't say any more, I will get it sorted."
After his promise to help, he then rang David Melville, chief executive of the FEFC, giving him a month to get the matter sorted out.
This week, the FEFC told the minister that it had offered a payment of Pounds 3,450 per student, backdated to the beginning of the year, with index-linking for further years. The Scilly Isles council has written to Mr Mudie to express its thanks.