Student loans to pay for tuition fees gain support: Vice-chancellors warn of falling standards without extra funding

THE PROSPECT of graduates having to pay back their tuition fees moves a step closer today with the publication of a new report on the funding of universities.

Vice-chancellors, who fear that standards will fall if extra money is not found to fuel an increase of school-leavers going into higher education, look likely to support the idea of students taking out loans to provide their own fees. They will debate the options next month.

They will have to convince ministers of the wisdom of the scheme, which would be unpopular with middle-class parents. However, Michael Portillo, Chief Secretary to the Treasury, is considering it in his public spending review.

Today's report, commissioned by the Committee of Vice-Chancellors and Principals, from London Economics, a private consultancy, examines top-up fees, two different kinds of loans, and graduate taxes. Its conclusion leans towards favouring loans.

It warns, though, that all of those schemes would make it much more difficult for mature students over the age of 30 to return to higher education, because they would have fewer years in which to repay.

The proportion of school-leavers going into higher education has almost doubled in the past seven years to 28 per cent, and is expected to rise to one in three by 2000. Universities say the expansion cannot work without extra funding, but a squeeze on spending has made this unlikely.

At present, most students have their tuition fees paid for them through local authorities, but grants have been frozen at 1989 levels. Loans are available, and are paid back at a fixed rate once graduates start earning.

The proposed scheme would be different from the existing one because payments would be more closely related to income. Students could be allowed to pay their fees at a discount when they started university, or to take out a loan for them.

Under another scheme, students could borrow an amount of their choice. Both kinds of loan could be paid back through the tax system.

London Economics appeared to be less in favour of top-up fees or a graduate tax. Under a top-up scheme, universities could charge more for tuition than the amount provided by public funding. Students could then pay the money up-front or could take out a loan at the market rate. Academics fear it could create a two-tier system. The proposed graduate tax would be determined by the income of the graduate rather than what he or she cost the state during the course, and is criticised because the amount paid back would not relate to the cost of tuition.

A spokesman for the vice-chancellors' committee said: 'Right now, thousands of young people are being denied a university education because the Government can't find the money to fund the extra places needed to satisfy demand. Universities need the co- operation of the Government to set up a scheme whereby future graduates might contribute painlessly to the cost of their education.'