My son had the same problem during the summer, was on BTEA last year and when he went to apply again, they told him the same as yourself, that he was not entitled. He went to the local citizens advice center, who rang Longford directly, to a nice lady called Lilly who is the head of BTEA allowance there. She told him exactly what to do and that he was entitled to his claim. He was told to ask for the person dealing with BTEA in his local SW office not just the person on the counter, each office has a person dealing specially with BTEA. He got it all sorted in the end, but if you have to bypass your local SW office first, do so.
A lot of staff in SW offices have been moved in from other sections of the CS, and are not fully up on the knowledge on all aspects of SW, haven't been trained properly really and dont realise the damage they are inflicting on peoples live by not knowing.
Check out welfare.ie for BTEA details and phone numbers.