Sarah graduates from university this summer and hopes to go on to do a masters in political science. Yet five years ago she was a homeless teenager with few prospects. The only way she was able to break the cycle of homelessness was by breaking the law.

Her case highlights what some observers see as a fundamental flaw in the benefits system that is denying thousands of homeless young people access to vital education and training.

Sarah (her name has been changed) moved to London at the age of 19 after fleeing problems at home, and lived in a series of hostels. She had left school at 16 with a handful of GCSEs.

She began investigating courses at an FE college, but found that, if she went back into full-time education she would lose her housing benefit.

Faced with a choice of gaining qualifications or not having a roof over her head, she carried on claiming benefits illegally for two years while sitting A-levels.

“I think it’s disgusting what the Government is doing with this because a lot of people do want to get into education, but they can’t,” she said.

“And I know a few others who have dodged the system because there’s no other way.”

Charities which work with young people say the rules are hitting the most vulnerable young people, preventing them from developing independent lives.

The rules state that young people aged 19 and over who are studying for more than 16 hours a week are deemed unavailable for work - so cannot claim job-seekers’ allowance or housing benefit.

Jane Slowey, chief executive of the Foyers federation charity said: “I think without exception, where I have met young people in Foyers, someone has raised the 16-hour rule with me. It’s the single most common issue that young people raise.”

Foyers are independent providers of accommodation that integrate health promotion and education and training opportunities for homeless young people.

Of the 10,000 who go through their doors each year, nearly a third have their access to “second chance” education blocked by benefits rules. An estimated 14 per cent are young people who have been in care, with poor levels of educational achievement. “The Foyer works to help them pick up the threads of their learning, and then they get clobbered with this at 19,” Ms Slowey said.

The charity is running a “Give Us A Chance” campaign, calling for the Government to abolish the 16-hour rule. Ms Slowey said there had been precedents - the rule was relaxed to help redundant car workers in the Midlands retrain. “It seems completely barmy to me. It’s a really good example of where one government policy directly conflicts with another,”

she said Pam Hibbert, principal policy officer with children’s charity Barnardo’s, says the benefit rule is an issue for those who have been in care.

“We know about the poor achievement of care-leavers in secondary schools. A lot don’t go by that normal route of A-levels and university. They have often had disrupted education or haven’t got the basic qualifications.

“It’s an issue for lots of other 19-year-olds as well - a lot have parents who support them , but clearly the care-leavers won’t.”

The rules relating to FE and housing benefit are being reviewed by the Department for Work and Pensions. For care leavers in particular, the situation is worsened by confusion and varying support for education and training by local authorities.

The Children (Leaving Care) Act, which came into force in October 2001, was designed to improve support for those leaving care. But Pam Hibbert, of Barnardo’s, says that, although the Act places clear duties on local authorities to support care leavers at university, it is less clear about support for the FE courses that can get them there.

“For those young people doing vocational training or who want to take an access course or A-levels to enable them to get to university, it’s not a very firm duty. So it becomes a lottery,” she said.

Professor Bob Broad, director of research and evaluation at the National Children’s Bureau, said education support for care-leavers had been confused since before the 1989 Children Act - and the recent legislation had failed to clarify it.

In a recent research project, he asked young care-leavers about the impact of the Children (Leaving Care) Act on their lives.

“Significantly, the two areas that hadn’t shown an improvement were education and health,” he said. “And of course, they tend to be those with the poorest health record and high needs in education.”