Anyone curious about what may emerge from the Government's consideration of the level of top-up fees should turn to a long piece by Paul Fain in The New York Times of 1 November on the changing face of American public higher education. He's a reporter from The Chronicle of Higher Education, whose readers know that the process he describes has been going on for a long time. But its implications are becoming clearer, and they carry a message for the UK.

Start with a nasty number. The University of California system - the top layer of the higher education system, comprising ten universities such as Berkeley, UCLA, Santa Barbara and so on - is running a deficit of $1 billion (?610 million). UCLA's share is $131 million. This year, President Obama's stimulus programme, which has been even more of a godsend to community colleges at the bottom of the pecking order, has covered around three quarters of the deficit. Next year? Who knows? If ever there was a failed state, politically speaking, it's California. California's politicians are utterly incapable of resolving its multiple fiscal crises, and the voters equally incapable of electing better politicians or seeing any reason to do it.

Now some non-nasty but surprising numbers. The University of Michigan at Ann Arbor is a terrific university. It is also, unequivocally, a public university, legally speaking, in a way that UK universities are not. It is a state entity, and its faculty members are technically, if not very visibly, state employees. How much of its revenues come from the State of Michigan? Seven per cent. Even the universities of Oxford and Cambridge get around a quarter of theirs from the Higher Education Funding Council for England. Is the University of Michigan in trouble? Apparently not. A similar story can be told about the University of Virginia.

What is happening is this. All US public universities have a history of charging much lower tuition fees for in-state students than they charge for out-of-state students. The purpose of Rutgers University is to educate bright New Jersey students regardless of their ability to pay for the education they'd get down the road at Princeton University. It isn't to provide an underpriced education to kids from New York or Pennsylvania. But even the out-of-state tuition at a public university used to be much lower than the tuition at an Ivy League university or a comparable liberal arts institution such as Williams College; 15 years ago, Berkeley's out-of-state tuition fee was about two thirds of Williams' tuition fee. That's changed.

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In fact, it's changed twice over. In the first place, a university such as Michigan charges out-of-state students the same eyewatering fees as Princeton. Princeton costs a shade over $50,000 a year for tuition, board and lodging, books and incidentals. Tuition is $35,340. Oxford and Cambridge fruitlessly plead to be allowed to charge half as much. Tuition at Michigan is $36,163. The same thing is happening elsewhere; Virginia, where I teach each spring, startled everyone when it started charging $30,000 a year to out-of-state students a few years back. The other thing that is happening is that they are trying to get many more such students; the gap between the $9,000 an in-state student pays at Virginia and the $32,000 that an out-of-state student pays makes a lot of difference when the state is chipping in less and less.

What happens to affordability? Students from less well-off families don't suffer. Most top state universities charge no tuition fees to students whose family income is below $60,000 - just over ?36,000. And students from very well-off families have parents who readily cough up a quarter of a million dollars for their education. It does mean that in-state students face fiercer competition for places at their local system's flagship: imagine Oxbridge with 50 per cent overseas undergraduates rather than 6 per cent. States vary in their readiness to loosen the rules about out-of-state students; some keep a tight lid on the percentages, others are steadily relaxing the rules. Read "overseas" for "out-of-state" and it begins to sound very familiar.

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Another thing that adds to the sense that the US present is the UK's future is that only some of the flagship public universities have been able to use their non-state funding - fundraising and out-of-state tuition fees - to improve to the point where they compete on level terms with the private universities; others are filling the holes in their budgets, and still cutting classes and laying off faculty. Who would pay Stanford-level fees to go to UCLA if they weren't sure that the programme they enrolled for would still be running in two years?

Even in the US, there are a finite number of families who can pay a quarter of a million dollars for a degree. Lower down the university pecking order, semi-privatisation isn't an option, and the old gap between well-heeled private and hard-up public universities is replicated in the gap between top and middling state universities, and indeed between universities in states where the legislature gives universities room to manoeuvre and those that behave like UK governments over the past three decades and mandate policies they won't provide the resources to implement.

It makes one wonder what will happen when the countries that send so many students to the UK can themselves provide the same quality of education as anything below the top-tier UK universities. Will University College London and Imperial College London look like the University of Michigan as they rely on getting 35 or 40 per cent of their fee income from their overseas intake - as the London School of Economics does already - and universities further down the league tables scramble for resources? It seems all too likely.

Alan Ryan is visiting fellow in politics, Princeton University.

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