Students slam Tory loans plan

Students today labelled Tory plans to charge commercial rates on loans "abhorrent", as university bosses gave them a cautious welcome.

The president of the National Union of Students (NUS), Kat Fletcher, expressed "grave concerns" over the plans, which would see tuition fees dropped and replaced with a commercial rate of interest on student loans of up to 8%. She immediately sought to distance the union from the Conservative party after sharing an uneasy alliance since it announced it would abolish fees.

"Though the Tories stood by the NUS in our battle over tuition fees, we now recognise that their promises for a fairer funding situation for higher education were merely rhetoric. It is naive for the Tories to believe that this will win the student vote in the run-up to the general election.

"Such proposals will only serve to burden those already severely in debt with more debt over a period of time, marking a regressive response to the funding crisis in higher education."

However, Universities UK (UUK), which represents university vice-chancellors, said the plan recognised its concerns over getting more money into universities. UUK has vigorously supported the government's plans for top-up fees.

Its president, Ivor Crewe, said members had been consulted over the plans. "We look forward to discussing the detail with the Conservative team, particularly with regard to the voucher scheme. One of our top priorities will be to ensure a commitment to maintaining the unit of funding per student."

The fully-costed details of the plans are expected to emerge later today, but speaking on BBC Radio 4's Today programme this morning the shadow education secretary, Tim Collins, claimed the plans would raise as much money for the universities as the government's plans for top-up fees, but students would be better off.

At present, all students are able to take out student loans of up to ?3,695. They start repaying once they earn more than ?10,000 at the rate of 9p on every pound earned above this threshold - plus an inflation-only interest rate.

Under the proposals being released today students would be charged 2% above the bank base rate to a maximum of 8%. The plans would help dissuade students from taking out expensive credit cards, Mr Collins said.

Universities, rather than the treasury and the government-owned student loans company, would control the loans and would be able to borrow against future earnings to raise money now. And they would honour the government's plans to introduce a ?1,500 grant for the least well off from September 2006.

Professor Nicholas Barr, the original architect of the government's top-up fees plans, said: "The Conservative proposals unambiguously help students from better-off backgrounds (who no longer have to pay fees) and harm students from poorer backgrounds, who will be hurt by the higher interest rate.

"This policy direction is problematical in two ways: it is deeply regressive, benefiting merchant bankers at the expense of nurses and teachers; and, by impeding access, it risks losing the talent of bright people from poorer backgrounds. It is good policy if the aim is to curry favour with the middle classes, but has no other redeeming features.

Phil Willis the Liberal Democrat education spokesperson, said: "Michael Howard is now showing his true colours. Under his plans only the wealthy should apply to universities.

"Tory policies will see poorer students being priced out of universities by huge hikes in the cost of student loans.

"By introducing commercial interest rates poorer students will end up with astronomic levels of debt and many will be put off going to university all together."