Under proposals to force those who benefit most from their degrees to pay more, a system of “tiered” interest rates will be introduced for those starting university after 2012.
Graduates who go on to high-paying jobs will end up contributing thousands of pounds more for their degrees than those who are less successful, ministers have decided.
A government-backed review next week is expected to recommend giving universities the power to impose fees of up to £10,000 a year, three times higher than the current rate.
With the cost of a three-year degree and associated living expenses rising to as much as £80,000, ministers have been engaged in intense negotiations aimed at finding a way to place the burden on graduates rather than the taxpayer.
They have ruled out a flat “graduate tax” on all wage earners with a degree, and will instead introduce the more “progressive” system that would link contributions to earnings.
Lord Browne, the former head of BP who is carrying out the review, will recommend that universities are given the freedom to charge more than the current cap of £3,290 per year.
Ministers hope to build on the review’s work by fleshing out their preferred option of tiered interest rates for the repayment of student loans. On average over a lifetime, graduates can expect to earn £100,000 more than non-graduate workers.
The majority of students take out student loans to cover the cost of tuition fees.
Loans are subsidised by the Government, and at present graduates repay at an interest rate linked to inflation or the Bank of England base rate. Most pay about 1.5 per cent. Payments start after a graduate begins earning £15,000 or more.
One well-placed source said: “The exact details of the structure are still being worked out and will partly depend on the agreement struck with the Treasury on government funding for universities. But we have basically agreed a system of different interest rates for student loans depending on how much a graduate earns. This should prove a fair compromise which will be acceptable to Liberal Democrat supporters. It is a higher contribution from well-paid graduates, not a graduate tax.”
A second source added: “As the Prime Minister said in his speech to Conservative conference this week, it is right for the broadest shoulders to bear the heaviest load.
“This is the approach which both sides are very happy to sign up to — in fact, it is a sign of how well the Coalition is working that there are extremely good relations between us all. We have got to see the final findings of Lord Browne, and it is no secret that the higher education settlement is linked to the entire Comprehensive Spending Review, but we hope he will find in the way the Government expects.”