Officials say they are confident of avoiding a repeat of last year's lengthy delays in education maintenance allowance payments, despite raising the scheme's risk level to "amber".
The Learning and Skills Council believes Capita, which took over administering the Pounds 30-a-week payments after 100,000 students were left waiting for more than three months for the cash, has the systems in place to deal with a rush of claims at the beginning of the academic year.
David Russell, the LSC's finance director, said the risk management board had decided to raise the risk level from "green" only because it was the first time Capita would be working with these systems.
He said: "I think we are in a much better position with EMAs than last year, when we had a number of problems with our previous supplier.
"The transfer from Liberata to Capita has gone extremely well."
A decision that students staying on for the second year will not have to re-apply unless their circumstances change could potentially cut the number of applications Capita has to process in September by half to about 250,000, Mr Russell said.
Improved risk management was one of the recommendations of an internal review following last year's crisis, which saw some colleges using their own budgets to make payments and prevent students dropping out.
The review said the funding body only monitored the financial risk and did not pay enough attention to the impact and damage to its reputation of failing to provide the allowances on time.
It also said the LSC should reduce its dependence on new bespoke technology such as the systems used by the former contractor, Liberata.
Where it had to use untried systems, it should phase them in or run them in parallel with established ones, the review said.