Lifting the cap on university fees is the only “viable and fair” way to secure the future of the UK’s world-class higher education system, a group of elite universities has claimed.

In its second submission to Lord Browne of Madingley’s independent review of university fees and funding, the Russell Group argues that graduates should pay more in the short term, with “liberalisation of the fee regime” a future aim.

Under the current system, the taxpayer still foots the lion’s share of the bill, which is unfair when graduates reap the biggest benefits, the group says.

“Graduates should be expected to contribute more in view of the substantial private benefits they secure through attending university,” the submission argues.

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However, the document also stresses that extra income from graduates should not be used to replace existing public funding.

“To secure the long-term financial sustainability of the country’s leading universities, it will be necessary to increase overall levels of investment, not simply to replace public funding with increased levels of private investment,” it says.

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The group makes the case that higher fees would not necessarily mean a significant increase in lending from the public purse.

Instead, the cost of student support could be lowered by introducing a “real” rate of interest on student loans and through private investment.

Under one option, the Student Loans Company would continue to provide income-contingent loans to students, but would finance this by selling bonds linked to graduate repayments to private investors.

Another model would be for universities to raise funds by selling bonds linked directly to graduate repayments, or annuities funded by future income from this source.

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The third possibility explored by the group is for banks to provide income-contingent loans to individual students.

The government could achieve an overall cost reduction in comparison with the current system while still providing loans to cover the full tuition fee, “even up to a fee of £9,000 per year, if necessary”, the document claims.

But Aaron Porter, president-elect of the National Union of Students, said removing the cap on fees would expose students and their families to “the huge risks and potential calamities of the market, abandoning them to sink or swim”. He said the Russell Group’s proposals could leave graduates with debts of more than £40,000.

rebecca.attwood@tsleducation.com