MPs call for higher student fees

Students should pay higher tuition fees and should no longer receive "soft" loans, an influential group of MPs is set to demand.

The Labour-dominated education select committee is to call for the moves in a bid to find more money for cash-strapped universities.

Ministers would face a storm of criticism if they decided to bring in higher tuition fees when they publish their long- awaited review of student finance in the autumn.

Such moves would be condemned as another attack on middle-class, middle-income families, millions of whose children are in higher education.

The committee's report, expected within days, is understood to attack the government for botched reforms to the student finance system shortly after Labour came to power in 1997.

Former education secretary David Blunkett accepted a key recommendation of education expert Lord Dearing to introduce tuition fees but ignored his call to keep the student grant.

Tuition fees of up to £1,075 are paid by around half the student population. They are supposed to represent about a quarter of the total average cost of teaching at universities but vice-chancellors say that funding of £4,000 a year per student is inadequate.

Loans up to a maximum of £3,815 are available on what is effectively a straight repayment basis with no interest charged.

Critics of the scheme argue that the loans amount to a subsidy for middle-cass undergraduates.

But the National Union of Students says ending it would make it harder for graduates in low-income jobs to pay off their debts.

Ministers are understood to have seriously considered introducing commercial rates of interest but Margaret Hodge, minister for higher education, told MPs she was "nervous" of the idea.

The committee is set to claim that even a low rate of interest on loans, say two per cent, could deliver about £400 million extra for universities.

Students from low-income families would be exempt.