Sarah Churchwell: Learn some lessons from America's mistakes

Britain seems oblivious to a cautionary tale that is emerging across the ocean

Student debt in Britain has just passed £3bn; if, as seems likely, the caps on top-up fees are lifted, this number could rise. In other words, higher education in the UK is starting to look remarkably similar to higher education in the US. Yet Britain seems oblivious to a cautionary tale that is emerging across the ocean and might well have implications for student lending here.

Recent allegations of improper business practices in the administration of loans to US university students have increasingly implicated the institutions of US higher education, right up to the federal government. The investigation involves more than 100 universities, and the lending institutions responsible for 80 per cent of all student loans issued nationwide. Investigators have claimed to uncover kickbacks, bribes and other inducements, shared revenue agreements, and other conflicts of interest in the administration of student loans.

Top-flight university education in the US makes top-up fees look like proverbial chicken feed. Ivy League universities charge students about £22,000 a year for four years: these students pay around £88,000 for tuition alone, before living expenses.

Most US universities offer students financial aid. Part of their service is to provide advice on loans, including a short-list of preferred lenders; about 90 percent of students applying for aid use these lenders. The obvious, if tacit, implication is that these lending bodies were selected because they offer students the best rates. The allegations of deceptive practice and conflicts of interest, which have spread to include high-ranking officials at Ivy League universities, suggest otherwise.

According to the investigators, lending institutions have engaged in profit-sharing agreements with universities. In one case, employees of the lenders apparently answered the telephones at university financial aid offices (which should offer impartial advice to students). In another instance, a lending company was accused of paying consulting fees to a loan officer at the highly prestigious Johns Hopkins University.

Last month these allegations broadened to include the Department of Education, which has been accused of operating a "revolving door", in which it appointed top officials who were previously employed by student lenders or related companies; critics have claimed that the Bush administration knowingly gave lenders influential positions in the department.

As higher education in the UK increasingly follows US models - more students, mounting costs, escalating debt - Britain should consider some of the failings, as well as benefits, of America's example. The best American universities equal - and can surpass - the best anywhere. By no coincidence, they are also the richest: Princeton, where I got my PhD, has more money than many small nations (that is a fact, not a quip). This makes them nice places to be, if you can get there. But most people who get there, like me, had every advantage along the way: I earned my place, but an affluent, well-educated background certainly helped.

A recent survey of 150 American universities, including 11 top-flight institutions, found that only 3 per cent of their students come from the nation's lowest-income families, down from 10 per cent in the mid-1970s. America's poorest are losing ground in the struggle to access the benefits of higher education, itself a major factor in breaking free from poverty. Welcome to the vicious circle - a circle that has begun widening to include Britain's poorest.

Of the various schemes proposed for solving this problem, one of the most elegant, and successful, was President Clinton's "Teach for America" plan, which offers loan assistance or forbearance for students who teach in underprivileged schools for two years after graduation (an idea developed by a Princeton undergraduate in her senior thesis). It remains an immensely popular programme, with bipartisan support.

Britain needs to begin following such examples, and the government should fund more merit-based scholarships and bursaries. UK universities need to learn how to fundraise from their graduates, and they must ensure that a new love of "KT" (knowledge transfer, ie, university-corporate partnerships) does not create conflicts of interest.

The first code of practice for student lending is being drafted in the US in response to the scandal. The British government needs to continue safeguarding student lending rates, without getting on the slippery slope toward exploitation; the British people need to stop complaining about top-up fees - it's too late - and instead watch for changes in practice that benefit corporations at the expense of students.

Like many universities across the UK, mine is in the midst of adopting a "corporate plan". Some would say this is just semantics, but let's not lose sight of a fundamental idea: universities are not for profit. This means that they should not be profiting from their students, and that they should not be held to corporate models of economic viability. These kinds of pressures, unchecked, will almost certainly send some UK institutions into the kind of unsavoury practices being uncovered in the US today.

Perhaps Britain might consider learning from America's mistakes for once. And meanwhile, students could also cultivate a little gratitude. Things could be a lot worse.

The writer is a Senior Lecturer in American Literature and Culture at the University of East Anglia