The news comes as the Association of Educational Psychologists (AEP) balloted its members over strike action with nearly two-thirds supporting direct action on 30 November, as part of public sector protests over pension reforms.
The £16m, allocated over the next three years, will ensure that educational psychologists will have their tuition fees paid for and will be offered bursaries to help them cover the cost of training.
The funding announcement follows a review of training and funding for the profession. The review also recommends retaining the current three-year doctorate degree that is required to become an educational psychologist, but says the system must become centrally managed to ensure quality and consistency.
Children's minister Sarah Teather said: "Educational psychologists have a valuable role working with children and families in schools, and as part of early intervention projects.
"We want the most vulnerable children, and those who would benefit from extra support, to be able to access the expertise and support of educational psychologists. Today's announcement helps to secure the future training of educational psychologists and is part of the work we are doing on the SEN green paper."
The Children's Workforce Development Council will have responsibility for managing the training of educational psychologists at a national level until April next year, when the Training Agency will take over its duties.
The government’s review also recommends that a national steering group is created to manage the relationship between training and placement providers and that an accreditation scheme for placement providers is developed to improve consistency and quality of placements.
Kate Fallon, general secretary of the AEP, said: "We have been calling for this review for more than a year, and are delighted that Sarah Teather has recognised our concerns about how the training of educational psychologists will be funded.
"The review has provided a number of thoughtful recommendations that reflect the government’s appreciation of the importance of educational psychologists and their role in ensuring the best outcomes for children and young people.
"We have continuing concerns over the recommendation to provide trainees with a bursary for all three years rather than trainees taking on placements in years two and three of their course, but we are pleased that the review has also recommended further discussions on how additional training models that encourage a wider range of people to enter the profession can be developed."
On the strike action, Fallon added that while most in the profession do not want to strike "with morale among the workforce being extremely low, many feel industrial action is only way they can express their concern for their futures".
