Many young people with special needs face a "life-long legacy of lost opportunities" after falling through the gap when they leave school, a report warns.
Almost a third of young adults with a statement of special educational needs (SEN) at age 16 are not in school, work or training by the time they are 18 - a figure the influential Commons Public Accounts Committee (PAC) condemned as "shocking".
In the report released on Friday, the cross-party group of MPs raised concerns that "vital" support for these youngsters has not always been given enough attention.
It says that the special education system is "hard for parents to navigate, with some driven to despair when searching for appropriate support for their child".
The report adds that gaps in data about performance mean that young people and their families do not have easy access to information which would help them decide which services are best for them.
The government spent around £640 million on special education support for 147,000 students aged 16-25 in 2009/10, the report says.
It adds that numbers of young people with SEN staying in education have risen in recent years, which has made it more important that the Department for Education "makes the best possible use of the funding available for these students".
But the committee warned: "We are concerned that this vital support for young people has not consistently been given the priority it deserves.
"It is shocking that 30% of young people with a statement of special educational needs at age 16 are not in education, employment or training at all by the time they are 18.
"Too many young people with special educational needs are therefore falling through the gaps when they leave compulsory education, with a potential life-long legacy of lost opportunities and costs to the public purse."
Committee chair Margaret Hodge said the system is "extremely complex" with many different providers including schools, further education colleges and specialist services.
"Too many parents and young people are not given the information they need to make decisions about what is right for them, with many losing hope," she said.
"Parents need to know what support their child is entitled to, how it can be accessed, and how well different options would meet their child's needs. But three-quarters of local authorities do not give parents any information at all about the respective performance of schools, FE colleges and specialist providers.
"The Department doesn't know how much money is actually spent on supporting young people with special educational needs. The huge variation between local authorities in funding per student suggests that a postcode lottery is at work.
"The Department's proposals to change the way that special education is funded are an opportunity to make the system simpler, fairer and more transparent."