Threefold cuts hit debt-strapped students

Universities face 'valley of death' funding crisis as they struggle to save £180m
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Students face a triple whammy of cuts in maintenance grants, higher fees and increased loan repayments under a blueprint for the future of universities unveiled today.

The proposals, published by a task force set up by the CBI – which included university vice-chancellors, have been described as "offensive" by students' leaders.

However, Richard Lambert, director general of the CBI, said: "The economic downturn makes cuts to public funding for higher education inevitable. New sources of funding have to be found. We're not saying this is great news... but the world has changed."

Crucially, the report was welcomed by university vice-chancellors and the Conservatives. The party's universities spokesman, David Willetts, applauded the CBI's call for closer links between business and universities.

The key proposals to emerge from the task force are that students should pay their loans back at the market rate in future – and that maintenance grants should be trimmed to 2006 levels.

This would hit middle income families hardest, reducing the maximum family income to qualify for a maintenance grant to the level it was at three years ago – £38,000 compared with just over £50,000 now. For a full grant, a youngster whose parents earned £17,000 would qualify then as opposed to £25,000 now. On fees, it says: "An increase... appears inevitable." It cites university vice-chancellors saying a rise from £3,145 to £5,000 would be unlikely to have an effect on student demand for places. The proposal to force students t pay back loans at the market rate would save the Government £1.4bn a year.

The report paints a scenario where universities are coming under increasing financial strain with the Government already asking them to make cuts of £180m by 2011. Some are predicting cuts of between 10 and 20 per cent.

The task force is adamant the research funding and teaching budgets should be protected to preserve the quality of higher education. Student numbers, it argues, should not be reduced either.

Paul Marshall, executive director of the 1994 Group – which represents the country's research intensive universities which are not members of the Russell Group (such as Exeter), said: "Enhanced funding is the only option to prevent universities going through a valley of death over forced cutbacks."

In reality, though, both Labour and Conservatives are likely to keep their powder dry on student finance until they see the results of a government initiated inquiry into fees – due to report after the General Election.

The most forthright condemnation of the proposals came from university lecturers and student leaders.

Wes Streeting, the NUS president, said: "Students are already leaving university with record levels of debt while graduate job prospects are at an all-time low."