Tough restrictions have come into force for students seeking grants for Masters courses.

The era when a first degree was the closest thing possible to a guarantee of a well paid job has now become a distant memory. Now, we're fast approaching the stage when a Masters is necessary to make a CV stand out in the graduate jobs market.

But is it becoming harder for UK students, already sinking in debt after three or fours years as an undergraduate, to attract funding to help them pay some of the fees and living costs associated with a Masters course? The Conservatives' higher education spokesman David Willetts thinks it is, because he's unearthed evidence of what amounts to policy change by some of the state-funded bodies that support postgraduate courses and students at British universities. And he says it's preventing talented students from less well-off backgrounds from pursuing postgraduate study, thereby thwarting advances in social mobility.

At the centre of the argument are the seven UK research councils that, historically, have provided financial support to a proportion of university Masters courses, much of which has been passed on by the universities to participating students, to contribute to the costs of course fees and living. These councils distribute £2.8 billion a year to support research across all academic disciplines, including medicine, the physical and social sciences, engineering, economics and the arts. But most of the research councils have now made a change to their funding criteria that has effectively reduced the number of taught Masters courses receiving help.

In short, the councils are implementing a much stricter insistence that, for a course to be supported, it must be predominantly related to research. This has ruled out a number of courses, for example the Masters in bioscience enterprise at Cambridge University, which has fallen foul of new arrangements brought in by the Engineering and Physical Sciences Research Council.

The Cambridge course, which has been running since 2002 and has attracted students from home and abroad, exposes graduates to the latest advances in biotechnology, in the fields of disease treatment and agricultural genetic engineering, for example. And at the same time it also teaches the business skills to allow them to commercially exploit such expertise.

Since the course began, British graduate participants have received EPSRC grants, passed on by the university, covering most of the basic expenditure of £15,000 in fees and living costs. This year there are four British citizens among a course of 25 students. But, with effect from next autumn, the funding will be discontinued – even though Cambridge academics are reporting declining interest among their British students in participatingnext year, due to their financial circumstances.

"It's not clear who's funding taught Masters courses anymore," says the university's pro vice-chancellor for research, Professor Ian Leslie. "This obviously does have an impact, in that overseas students do appear to be able to get funding whereas home students are struggling."

The new approach from the EPSRC means that taught Masters courses qualify for funding only if they satisfy one of two strict criteria: the course must either be intended as a preparation for more advanced research at PhD level; or it must be designed to enable better exploitation of existing council-funded research. The new stance came, according to Alex Hulkes, who manages a large chunk of the grants, as a result of what he called some "hard thinking" about why the council was putting money into Masters courses. Although he argues the change is "not seismic", he concedes that the new rules represent a shift away from funding masters courses in general.

"Lots of universities have decided that their courses don't square with our aims," he says. "They have decided they don't need masters courses for funding their research."

Willetts claims research councils across the board have adopted what he calls a more rigorous application of funding policy, leaving the taught Masters course in the lurch across the university landscape.

"This is a new barrier to social mobility," he argues. "Increasingly, you need this level of education to get into certain types of job, but it is now no longer available to people who have limited resources."

In response, a spokesperson at the Department of Innovation, Universities and Skills agreed that the research councils had now largely withdrawn from supporting taught Masters programmes, but suggested this was a trend that had started a few years ago.

He also pointed to the year on year growth in participation in such courses – up nearly 45 per cent to 287,000 in the past six years – as evidence of their continuing popularity.

Masters degrees: how funding has changed

In the past decade, the number of postgraduate students at British universities has massively increased, from 100,000 students in the mid 1990s to more than half a million now. The rise is partly fuelled by foreign students, who comprise about 23 per cent of the total.

Across the postgraduate landscape, around half the students are on Masters courses, and the rest on PhDs. With the sole exception of teacher training courses, fees are charged for all postgraduate courses, and living costs are borne by most students as well, since student loans are restricted to undergraduates. British and EU students pay tuition fees of £2,000 to £10,000 for Masters courses, and average living costs are estimated at £10,000 a year.

"It's almost always expensive to be a postgraduate student, and a straight one-year Masters is very hard to get research council funding for," says Chris Rea, of Graduate Prospects, the official graduate support service. However, the substantial financial hurdle facing students doesn't seem to have affected the popularity of these courses, a fact Rea puts down partly to a gradual evolution in modes of study. "There's more flexibility these days in the way courses are delivered... that makes it possible for students to do some paid work to help fund their studies," he says. SMcC