The Student Loans Company (SLC) is reviewing its process for detecting fraud after the Guardian revealed that dozens of vulnerable students were losing funding and dropping out of university despite no finding of guilt against them.

The SLC made a random selection of 150 estranged students, part of a group recognised as vulnerable because they have no relationship with their parent and tend to be financially disadvantaged, and asked them to provide evidence that they no longer had contact with their families.

Charity workers supporting the students said if they failed to respond within 28 days with the required proof their funding was suspended.

In some cases, students’ social media accounts were monitored for any contact with parents, leading to accusations of spying.

The minutes of an SLC meeting seen by the Guardian said 81 of the 150 had funding withdrawn. The figure has fallen as some cases have since been resolved, but campaigners said the affected students suffered enormous stress and hardship as a result.

Stand Alone, a charity that supports estranged people, on Wednesday said it had spoken to the chief executive of the SLC, Peter Lauener, who said he would be launching a review of the process following condemnation.

The charity has continued to demand an apology from Lauener over the disruption to the lives of affected students, who had the third and final instalment of their maintenance and fee loans suspended.

Some, the charity said, had to wait five months to have it reinstated, leading to extreme poverty, homelessness, defaults on tenancy agreements and a deterioration in their mental health.

Stand Alone said: “We spoke to the chief executive of Student Loans Company yesterday, who has personally agreed to lead a review of this counter-fraud process, and the cases where funding has been suspended.

“It is disappointing that SLC will not immediately reinstate the fee and maintenance loans for the 44 students who are still without funding, and who have had the final instalment suspended before being found guilty of fraud, or before a full fraud investigation has been completed.”

The charity called the SLC’s actions “a hostile and aggressive measure against some of the most vulnerable students in the UK, who lack family capital and are already financially disadvantaged”.

It added, however, that the review was “a step in the right direction, and we hope this goes far enough to ensure that the profile of estranged young people and their rights to family and private life will be of paramount consideration in all future processes”.

“Following this review, we hope that a full public apology will be issued to the students whose education and lives have been disrupted, and who have not been anything other than honest about their unfortunate family circumstances.”

The SLC said: “Earlier this year, the SLC carried out some sample checks of cases where students had declared themselves to be estranged. In some of the cases the checks resulted in the student’s entitlement being reassessed and their funding reduced.

“We are now reviewing the cases of those students who have not had their original funding entitlement reinstated to check whether we made the right decision for these individuals.

“We will also review our processes to improve the way we assess and verify applications from estranged students.”

