The announcement, which followed the completion of Sir Ron Dearing's 14-month inquiry into higher education, means that graduates from all but the poorest backgrounds will have to repay up to pounds 3,000 towards the cost of their degree, on top of bills for living costs.
The changes, which have been welcomed by universities but fiercely opposed by student leaders, will still leave graduates from the wealthiest families with smaller debts than their poorer counterparts. And they raise the prospect of "golden hellos" for brightest graduates from employers prepared to repay their fees.
David Blunkett, the Secretary of State for Education, told MPs yesterday that he planned to abolish maintenance grants and to make graduates from better-off families pay pounds 1,000 per year towards their fees. The move will mean that students whose parents earn less than pounds 34,000 could leave university with debts of around pounds 10,300. Those from richer families can still expect parental contributions, which will reduce their debts to around pounds 8,000. Details will be published in a White Paper in the Autumn, but it seems likely that graduates might start repayments when they begin earning more than pounds 10,000.
The Government's announcement marked a rejection of Sir Ron's main recommendations on funding. His committee decided that students should all pay a pounds 1,000 fee and that mean-tested grants should stay.
Mr Blunkett promised yesterday that the move would mean more money both for universities and for further education colleges, but he did not promise that the extra income would be ring-fenced. Universities have insisted that the depth of their funding crisis means the Government must plough all new money from fees and savings on grants back into higher education.
Although Sir Ron did not demand more input from employers, his recommendations cannot be implemented without their help. His report says that courses should relate more closely to the world of work.
In return for extra cash, universities will be expected to accept far tighter controls on the quality of teaching they offer. Students should be given a clearer idea of what they will learn before they start, and for the first time tutors will be expected to serve a probationary period in which they must gain teaching qualifications.
Making his announcement yesterday, Mr Blunkett warned universities that he would not tolerate the imposition of top-up fees by elite universities on top of the new loans. However, some were still threatening to introduce the charges last night. Both Durham and Nottingham universities - two of a group of six of Britain's old universities which have placed warnings of possible top-up fees in their prospectuses - confirmed they would make no decision on lifting the threat until the government's full funding plans became clear.
Stephen Dorrell, the Conservative education spokesman, said the news would be greeted with disappointment in Britain's universities. "That disappointment will turn to anger when they realise the scale of the lost opportunity which the Government has allowed to pass and the scale of Mr Blunkett's defeat at the hands of the Chancellor of the Exchequer," he said.
The Liberal Democrat education spokesman, Don Foster, welcomed the Dearing committee's proposals to expand student numbers and widen access to higher education, but denied tuition fees were the answer to the university funding shortfall. Students should pay more, but the money should come through abolishing maintenance grants in favour of loans, he said.
What it may cost you
What parents and graduates will pay under the Government's proposals:
pounds pounds pounds
Family income 16,000 23,000 35,000
(mnt) loan 3,440 3,440 2,685
contrib'n (mnt) 0 0 755
contrib'n (fees) 0 878 1,000
Total debt after
three years 10,320 10,320 8,055
* Based on students studying outside London
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