Louise Williamson, director of the children's division at the Refugee Council, said at least 7,500 people, including about 1,000 children, would become destitute immediately if the plans come into effect on January 8.
A further 40,000 people could be affected in the first year, about 25 per cent of whom will have dependants. If implemented the proposals would mean that for the first time since the birth of the welfare state, a large group of families would be left without recourse to any state help.
Ms Williamson said teachers could find that some of their pupils coming to school from night shelters and charity hostels, while others might suddenly disappear from the class after their parents had been evicted. Sick children, unable to get free medicine, could endanger the health of other pupils.
Under the plans put forward by Peter Lilley, the Social Security Secretary, asylum-seekers who put in a claim to remain in Britain from within the country, rather than at the port of entry (70 per cent of all asylum-seekers), will not be entitled to income support, housing benefit, disability allowances or any other benefit unless they come from a Home Office-designated "country of upheaval". No country has been so designated as yet. Benefit will also be denied to those appealing against negative decisions.
"Entitlement to free school meals, free prescriptions, uniform grants and concessionary fees for English language and vocational courses will be lost . . . crisis loans will not be payable," said Ms Williamson.
The Refugee Council has begun a campaign to inform teachers about the implications of the plans.
Jill Rutter, education officer, said that the Refugee Council was seeking legal advice on how the proposals would interact with existing legislation such as the Children Act or the Homeless Persons Act: "In Britain, immigration law often overrides the Children Act, but at the moment we are working in a great unknown."
The proposals go before Parliament on December 18, but because they do not require primary legislation they do not have to be debated. Labour, however, has promised to demand a debate. Chris Smith, the shadow social security spokesman, said: "It's an inhumane proposal because it contemplates quite happily leaving people without any means of livelihood."
The Government hopes the changes will save Pounds 200 million from the social security budget. But Mr Smith thought the Children Act would oblige local authorities to take destitute children into care, and that costs - about Pounds 800 a week per child - would wipe out savings.
Refugee groups argue that people fail to apply for asylum at ports of entry because they are frightened or do not understand the rules rather than because they intend to abuse the system.
Bob Sulaticki, a teacher at Holland Park comprehensive in London, a school where 15 per cent of the pupils are refugees, said: "Many schools with significant numbers of refugees do not know what is going to hit them.
Mr Sulaticki, secretary of the Kensington and Chelsea branch of the National Union of Teachers, added: "There is deep concern here, especially on things like free school meals - surely to deny food to the children in our care is completely unacceptable."
He said schools could find out what categories the refugee children in their school fall into - how many had full refugee status or extended leave to remain, and how many were from families appealing against negative decisions or were applying for the first time. The last two categories would be at risk from the new proposals.
Local authorities estimated that in March 1994 there were 21,500 refugee children in Greater London schools and a further 2,000 in schools outside the capital. Around 700 unaccompanied children have arrived since April 1994, 35 of whom have been in adult detention centres for up to eight months.